Monthly Archives: October 2017
People who do not have qualifying health insurance are subject to a penalty under the Affordable Care Act. Fortunately, a number of exemptions exist that protect individuals from being subject to the penalty. These exemptions include:
- Members of religious sects recognized by the Social Security Administration who have a religious conscience exemption
- Members of health care sharing ministries
- Incarcerated individuals, other than those who are incarcerated pending the disposition of charges
- Members of federally recognized Indian tribes
- Individuals qualifying for services through an Indian health care provider or the Indian Health Service
- Individuals with short coverage gaps of two months or less. An individual is treated as having coverage for a full month if she is covered for at least one day during a month.
- Individuals whose household or gross income is below the threshold for having to file an income tax return
- Citizens living abroad and certain noncitizens
- Individuals who are ineligible for Medicaid solely because the state in which they reside did not participate in Medicaid expansion
- Individuals with household income below 138% of the applicable year federal poverty line for their family size who reside in a state that did not expand Medicaid coverage
- Individuals enrolled in certain Medicaid programs that are not Minimum Essential Coverage
- Individuals who could not afford coverage based on their actual household income
- Individuals who could not afford coverage based on their projected household income.
- Individuals in families where the aggregate cost of self-only coverage for two or more employed individuals is unaffordable and the cost of employer-sponsored coverage for the entire family is unaffordable
The General Hardship Exemption
In addition, individuals who qualify for a general hardship exemption will be exempt from the penalty. Federally facilitated and federal partnership marketplaces may consider the following circumstances as keeping an individual from obtaining coverage under a qualified health plan:
- Becoming homeless.
- Being evicted or facing eviction or foreclosure.
- Receiving a shut-off notice from a utility company.
- Recently experiencing domestic violence.
- Experiencing the death of a close family member.
- Experiencing a fire, flood, or other natural or human-caused disaster that results in substantial damage to the individual’s property.
- Filing for bankruptcy.
- Incurring unreimbursed medical expenses that resulted in substantial debt.
- Experiencing unexpected increases in essential expenses due to caring for an ill, disabled, or aging family member.
- Claiming a child as a tax dependent when that child has been denied coverage in Medicaid and CHIP, and another person is required by court order to provide medical support to the child.
- As a result of a marketplace appeals decision, being determined eligible for (1) enrollment in a QHP, (2) lower costs on monthly premiums, or (3) cost-sharing reductions for a period of time during which the individual was not enrolled in a QHP through the state marketplace.
State-based marketplaces can use the same criteria, but have the flexibility to develop their own criteria, as long as they meet the requirements in the HHS regulations.
How would you like Uncle Sam to pay for part of your vacation? Sound unlikely? If you combine your vacation with a business trip, you may be able to deduct some of your expenses. Pay attention to the rules, though. Expenses must meet certain requirements before they’re tax deductible.
As long as your primary reason for making the trip is business, you generally can deduct the cost of your transportation to and from your destination. You’ll generally be able to deduct food (within limits) and lodging costs only for the days you actually spend on business.
Bring the Family
You can bring your family along, too. While you can’t deduct their food, lodging, or airfare, you can write off your own expenses, including the single-occupancy rate for lodging on days when you’re conducting business. If you and your family travel by car, you can also deduct the full cost of transportation. Just be sure to keep detailed records.
To learn more about tax rules and regulations, give us a call today. Our knowledgeable and trained staff is here to help.
The IRS may remove tax penalties if the taxpayer has reasonable cause (e.g., serious illness) for failing to comply with tax filing and payment requirements. This penalty relief is not automatic and may require filing with the IRS Appeals Office before it succeeds. In effect, the IRS rewards typically compliant taxpayers with one-time penalty amnesty, which can save the taxpayer hundreds—sometimes thousands—of dollars.
There is a hidden gem in the IRS penalty abatement policy known as the First Time Abatement (FTA) policy. This provision allows normally compliant taxpayers a chance to escape penalties.
The FTA provision applies if:
- No penalties have been added to or removed from the taxpayer’s account for the previous 3 years, or the taxpayer was not previously required to file a return.
- The taxpayer is current in filing all required tax returns (including extensions)
- The client has paid or made payment arrangements to pay any outstanding tax due (including being current on an installment agreement).
FTA applies to the following penalties:
- Failure to file
- Failure to pay (income tax)
- Failure to deposit (payroll tax)
The taxpayer will not be disqualified from receiving an FTA based on lack of a clean penalty history if the client:
- Had a penalty assessed more than three tax years prior to the tax return in question.
- Had an estimated tax penalty assessed in the past three years.
- Received reasonable-cause relief from penalties at any point in the past.
- Received an FTA more than three tax years prior to the tax return in question.
- Has penalties on subsequent tax years.
Comments or questions about this post? Please let us know through the comment area below!
If you found this article informative, subscribe to our Tax Newsletter.
Contact us for a Free Initial Consultation
Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.
Even after you’ve filed your income-tax return, you’ll want to keep thinking about your tax situation. For example, if you experience any of the “life events” listed below in the past year, it may be a good time for some tax planning.
A job change. If you are eligible for a distribution from your former employer’s retirement savings plan, consider rolling the money into another tax-favored plan or an individual retirement account (IRA) to avoid the receipt of currently taxable income.
A home sale. You may exclude profit — within limits — on the sale of your principal residence from your taxable income if you meet the tax law’s requirements.
A marriage or divorce. File a new W-4 withholding allowance certificate with your employer or, if you pay quarterly estimated taxes, review the amount you are paying.
A new child arrives. As a parent, you may be eligible for various tax breaks. Ask us for details.
To learn more about how life events affect your taxes, give us a call today. Our staff of professionals are always happy to help.
The IRS announced the 2018 cost-of-living adjustments to retirement plan limits. The following plan limits are increased effective January 1, 2018:
- Employee Contributions to 401(k) and 403(b) Plans: the contribution limit is increased from $18,000 to $18,500.
- Defined Contribution Plans: the limit on annual additions to a participant’s defined contribution account increases from $54,000 to $55,000.
- Defined Benefit Plans: the limitation on the annual benefit under a defined benefit plan increases from $215,000 to $220,000.
- Annual Compensation Limit: the maximum amount of annual compensation that can be taken into account for various qualified plan purposes increases from $270,000 to $275,000.
- Government Deferred Compensation Plans: the limit on deferrals under Section 457 (concerning deferred compensation plans of state and local governments and tax-exempt organizations) increases from $18,000 to $18,500.
Some limitations are not increased for 2018, including:
- The limitation for catch-up contributions to an applicable employer plan other than a SIMPLE 401(k) plan or SIMPLE IRA for individuals age 50 and over remains unchanged at $6,000.
- SIMPLE Plans: the maximum amount of compensation an employee may elect to defer remains at $12,500.
- IRS and Roth IRA Limits: the deductible amount for an individual making a deductible IRA contribution remains at $5,500. The Roth IRA limit of $5,500 remains unchanged as well.
If you have any questions on how these rules apply to give, please give us a call.
Tax planning is an important step in finalizing a divorce agreement. Here are some issues divorcing couples may want to consider.
What’s in a Name?
Alimony and child support both involve one spouse making payments to the other, but that’s where the similarity ends. Alimony payments are tax deductible to the payer and taxable to the recipient. Child support is not deductible and can be received tax free.
Dependent — or Not?
Generally, the custodial parent claims the dependency exemption, although couples can make other arrangements. Parents with more than one child may decide to split the exemptions between them. Parents might also decide to alternate claiming the exemption.
Who Gets the Credit?
The parent who claims the child as a dependent typically is entitled to claim tax credits such as the child tax credit and the credit for higher education expenses. However, a custodial parent paying work-related child care expenses can claim the child care tax credit even if the other parent claims the dependency exemption.
Assets To Transfer?
No taxes are owed on the transfer of assets between spouses. However, when dividing assets, it’s important to consider how taxes, such as capital gains, may come into play in the future.
How About Retirement Benefits?
Where retirement plan benefits have been made payable to a former spouse under a court-issued qualified domestic relations order (QDRO), subsequent distributions will be taxable to the former spouse.
For more information about divorce and taxes, give us a call today.
The tax deduction available for making a charitable donation of property may be no more than the fair market value of the property on the date of the gift. Fair market value is the price that a willing buyer and seller would agree to when neither is required to act and both have reasonable knowledge of the relevant facts.
The IRS lists several factors that may be considered in determining fair market value.*
Cost or selling price can be an accurate measure of fair market value when the transaction and the donation dates are close and there has been no change that would affect the item’s value.
Sales of comparable properties may be useful for determining value where the properties sold and the property donated are similar and the sales occurred reasonably close in time to the date of the donation.
Replacement cost may be a good indicator of value in some situations, provided that depreciation is subtracted from the cost to reflect the property’s physical condition and obsolescence.
Expert opinion is relevant to the extent the expert has the appropriate education and experience and has thoroughly analyzed the transaction.
Who Qualifies as an Appraiser?
Generally, where a charitable deduction of more than $5,000 is claimed for donated property, the IRS requires a qualified appraisal by a qualified appraiser. A qualified appraiser is someone who:
- Has earned an appraisal designation from a recognized professional organization or has met certain education and experience requirements
- Regularly prepares appraisals for a fee
- Is not an “excluded individual,” such as the donor, the donee, or a party to the transaction in which the donor acquired the property being appraised (Other exclusions apply.)
The qualified appraisal must be signed and dated and can be made no earlier than 60 days before the valued property is donated.
To learn more about tax rules and regulations for donations, give us a call today. Our knowledgeable and trained staff is here to help.
What if disaster strikes your business? An estimated 25% of businesses don’t reopen after a major disaster strikes.* Having a business continuity plan can help improve your odds of recovering.
The basic plan
The strategy behind a business continuity (or disaster recovery) plan is straightforward: Identify the various risks that could disrupt your business, look at how each operation could be affected and identify appropriate recovery actions.
Make sure you have a list of employees ready with phone numbers, e-mail addresses and emergency family contacts for communication purposes. If any of your employees can work from home, include that information in your personnel list. You’ll need a similar list of customers, suppliers and other vendors. Social networking tools may be especially helpful for keeping in touch during and after a disaster.
Having the proper insurance is key to protecting your business — at all times. In addition to property and casualty insurance, most small businesses carry disability, key-person life insurance and business interruption insurance. And make sure your buy-sell agreement is up to date, including the life insurance policies that fund it. Meet with your financial professional for a complete review.
If your building has to be evacuated, you’ll need an alternative site. Talk with other business owners in your vicinity about locating and equipping a facility that can be shared in case of an emergency. You may be able to limit physical damage by taking some preemptive steps (e.g., having a generator and a pump on hand).
A disaster could damage or destroy your computer equipment and wipe out your data, so take precautions. Invest in surge protectors and arrange for secure storage by transmitting data to a remote server or backing up daily to storage media that can be kept off site.
Protecting your business
If you think your business is too small to need a plan or that it will take too long to create one, just think about how much you stand to lose by not having one. Meet with your financial professional for a full review.
For more tips on how to keep business best practices front and center for your company, give us a call today. We can’t wait to hear from you.