All posts by Calli McWilliams

Blog 06 11 13 – The Small Employer Health Insurance Premiums Tax Credit

Blog 06 11 13 – The Small Employer Health Insurance Premiums Tax Credit

The Small Employer Health Insurance Tax Credit (Code Sec. 45R) was created as part of the Patient Protection and Affordable Care Act, or more commonly referred to as “Obamacare”.  It is a tax credit of health insurance premiums paid by small employers.  This credit can be claimed on Form 8941 which needs to be included on the business tax return.

For tax years 2010 through 2013, small employers can receive up to 35% of premiums paid (maximum credit of $51,000), and tax exempt organizations up to 25% of premiums paid (maximum credit of $36,700).

For tax years 2014 through 2015, small employers can receive up to 50% of premiums paid (maximum credit $73,500), and tax exempt organizations up to 35% of premiums paid (maximum credit $58,800).

The amount of the credit per “Full Time Equivalent” (FTE) employees is capped at different amounts for different states.

To be eligible, a for-profit or not-for-profit small employer must; Employ fewer than 25 Full Time Equivalents, have average annual compensation of less than $50,000, and provide health insurance coverage for its employees.

When calculating FTE for purposes of the credit, owners, owners’ family, and seasonal employees who work fewer than 120 days are not considered.  However, the premiums for seasonal workers are included.

Employers who also employee household or non-business employees must also include them in the FTE count.

The definition for health insurance is: Benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise) under any hospital or medical service policy or certificate, offered by a licensed health insurance company.

It can include dental or vision plans, long term care, nursing home plans, Medicare supplement, and others (please see IRS site for complete listing).

It does not include HSAs, HRAs, Credit-only insurance, coverage for on-site medical clinics, automobile medical payment insurance, coverage only for accident, or liability insurance.

For more information visit our website at www.dncpas.com or give one of our accountants a call at 239-261-8337. Davidson and Nick CPAs has been serving Southwest Florida in helping individuals and businesses as CPAs and most trusted advisor since 1989.

Blog 06 04 13 – Health Care Insurance and Large Employers

Blog 06 04 13 – Health Care Insurance and Large Employers

The Patient Protection and Affordable Care Act, which was amended by the Health Care and Education Reconciliation Act of 2010, does not mandate an employer to offer employees acceptable health insurance, but does require that certain employers with at least 50  Full-Time Equivalent Employees pay a penalty starting in 2014.  This is if one or more of their Full-Time Employees obtain a premium credit through a health insurance exchange.  Employees can be eligible for a premium credit if the employer does not offer coverage to their employees or the employer offers coverage that is not “affordable” or provide “minimum value”.

This mandate is only applicable to Large Employers.  A large employer is defined as an employer with more than 50 full-time equivalent employees during the preceding calendar year.  To calculate the equivalents, both full and part-time employees are considered.  Full-Time employees are those working 30 or more hours per week, but exclude full-time seasonal employees who work less than 120 days.

In the calculation of the penalty, only Full-Time employees are used, part-time and seasonal workers are not included for penalty calculations.  They are only included to determine if the employer is a Large Employer.

Premium Credits for Individuals

In 2014 individuals who are not offered employer-sponsored health insurance coverage, are not eligible for Medicaid or other programs, may be eligible for coverage through an exchange.  These individuals will have income between 138% and 400% of the federal poverty level.  Those offered health insurance from their employers can only receive the premium credits for exchange coverage if they are not enrolled in their employer’s coverage, or the employer offers coverage that is not “affordable” or provide “minimum value”.  In determining if the coverage is “affordable” or does not provide “minimum value”, the individuals require contribution to the plan premium for self-only coverage exceeds 9.5% of their household income, or the plan pays for less than 60% on average of covered health care expenses.

Penalty Amounts

In 2014, the monthly penalty to be assessed to a Large Employer for each full-time employee who receives the premium credit will be one-twelfth of $3,000 for any applicable month.  The total penalty is limited by an extensive calculation.  After 2014 the penalty amounts will be indexed by the premium adjustment percentage for the calendar year.

Additionally, firms with over 200 full-time employees that offer insurance must automatically enroll new employees in the plan.  Employees must be given adequate notice, or an option to opt out.

Planning steps to take before the end of 2012, or early in 2013:

If you have “around” 50 employees, discuss the costs associated with the employer mandate with your accountant.

Should the business consider downsizing so that the business has less than 50 FTEs starting in 2014.

Is there a competitive advantage to providing health insurance to employees, if not and there are less than 50 FTEs, consider terminating insurance coverage.

Compare the cost of insurance with the cost of the penalty for not buying insurance – most businesses are financially better off paying a penalty, even with the loss of a tax deduction for health insurance expense.

The final decision does not need to be made until January of 2014, but discussing now can help plan for the implementation.

For more information visit our website at www.dncpas.com or give one of our accountants a call at 239-261-8337. Davidson and Nick CPAs has been serving Southwest Florida in helping individuals and businesses as CPAs and most trusted advisor since 1989.

2013 Tax Benefit Adjustments

May 9, 2013 Tax Blog

In 2013, Various Tax Benefits Increase Due to Inflation Adjustments:

For tax year 2013, the Internal Revenue Service announced the annual inflation adjustments for more than two dozen tax provisions.

  • The annual exclusion for gifts rises to $14,000 for 2013, up from $13,000 for 2012.
  • The amount used to reduce the net unearned income reported on a child’s tax return subject to the “kiddie tax,” is $1,000, up from $950 for 2012.
  • The foreign earned income exclusion rises to $97,600, up from $95,100 in 2012.

Details on these inflation adjustments and others such as the low-income housing credit, the dollar limits for high-deductible health plans and other amounts can be found in Revenue Procedure 2012-41.

IRS Announces 2013 Pension Plan Limitations; Taxpayers May Contribute Up to $17,500 to Their 401(k) Plans in 2013:

The Internal Revenue Service announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2013. In general, many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment.

Highlights include:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is increased from $17,000 to $17,500.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $5,500.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) rises to $5,500, up from $5,000 in prior years.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $59,000 and $69,000, up from $58,000 and $68,000 in 2012. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $95,000 to $115,000, up from $92,000 to $112,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $178,000 and $188,000, up from $173,000 and $183,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012. For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $59,000 for married couples filing jointly, up from $57,500 in 2012; $44,250 for heads of household, up from $43,125; and $29,500 for married individuals filing separately and for singles, up from $28,750.

For more information visit our website at www.dncpas.com or give one of our accountants a call at 239-261-8337. Davidson and Nick CPAs has been serving Southwest Florida in helping individuals and businesses as CPAs and most trusted advisor since 1989.

Education Tax Incentives

April 3, 2013 Tax Blog

Education Tax Incentives

With the enactment of the American Taxpayer Relief Act on January 2, 2013, two college tax benefits were extended thru 2017 and the tuition and fees deduction through 2013.  The 3rd college tax benefit, the lifetime learning credit, is already a permanent part of the tax code and did not nor does not require extending.

Only one of the tax benefits can be claimed per year per qualifying expenses per eligible student.

The American opportunity credit yields the maximum annual of $2,500 per eligible student.   In order to receive the maximum credit, an eligible student must pay $4,000 or more in qualified expenses.  The amount of the credit is also phased out depending on the modified adjusted income of the taxpayer.  A $1,000 is refundable even if the taxpayer does not owe tax, unlike other college tax benefits.

With the lifetime learning credit, $2,000 credit is available per return.  It however is not based on per eligible student as the American opportunity credit is, but on each tax return.  Also, unlike the American opportunity credit it is only available for graduate or post secondary education, or for skill and job improvements.  A taxpayer must pay $10,000 or more in qualified expenses to receive the maximum credit, and have sufficient tax liability to receive it.  There are phase outs on modified adjusted gross income for this credit.  This credit does not require a student have to be enrolled at least half time to receive the lifetime learning credit.

The tuition and fees deduction is an above-the-line deduction for qualified higher education expenses.  This means it is a deduction taken to reduce your modified adjusted gross income.  The deduction, like the lifetime learning credit, is phased out based on your adjusted gross income before the deduction.  The maximum deduction is $4,000.

For more information visit our website at www.dncpas.com or give one of our friendly tax accountants a call at 239-261-8337. Davidson and Nick CPAs has been serving Southwest Florida in helping individuals and businesses as CPAs and most trusted advisor since 1989.

Identity Theft, Tax Fraud, and Phishing

March 1, 2013 Tax Blog

Identity Theft, Tax Fraud, and Phishing

The IRS has made protecting tax payers, their refunds from identity theft, and the victims of such a top priority.  In 2012, the IRS more than doubled its employees who work on tax identity theft.  They also were able to prevent the refund of $20 billion in fraudulently filed refunds last year.  The IRS has arrested more than 100 people in connection to these crimes.  In January of 2013, they gave out 734 enforcement action against the targeted 389 suspects they focused on in that month alone.

Victims more often than not don’t learn that their identity was used to file fraudulent returns to claim a refund until they try to file their actual tax return and it is refused by the IRS.  The IRS urges taxpayers to quickly act and respond to notices from them that they might receive, so that they can start the process of correcting and securing your tax account and identity.

The IRS additionally urges taxpayers to not respond to emails or electronic media that appears to come from them.  This is referred to as “Phishing”, and is a method used to gain information needed to steal your identity.  No matter how official it may appear the IRS does not initiate contact with taxpayers electronically.  They will not electronically ask for pertinent personal information either.

Any suspicious correspondence should be forwarded to the IRS at phishing@irs.gov.

For more information on identity theft and fraud, visit www.irs.gov and click on their “Identity Theft” link at the bottom of the page.

If you suspect you have been the victim of identity theft and fraudulently filed tax refunds, call the IRS Identity Theft Hotline at 1-800-908-4490.

For more information on phishing, visit www.irs.gov and click on “Reporting Phishing” link at the bottom of the page.

For more information visit our website at www.dncpas.com or give one of our friendly tax accountants a call at 239-261-8337. Davidson and Nick CPAs has been serving Southwest Florida in helping individuals and businesses as CPAs and most trusted advisor since 1989.

Foreign Account Tax Compliance Act Updates

On January 17, 2013, the IRS released final regulations for the Foreign Account Tax Compliance Act (“FATCA”) to be effective on January 28, 2013. Enacted by Congress in 2010, FATCA targets non-compliant U.S. taxpayers using foreign accounts and requires foreign financial institutions (“FFIs”) to report information and withhold on some payments to FFIs and other foreign entities. The final regulations adopt and modify the proposed regulations that had been released in February 2012.

The preamble to the final regulations states that a FATCA Registration Portal will be created, and that it will be the primary means for financial institutions to interact with the IRS to complete and maintain their FATCA-related registrations, agreements and certifications. It should be accessible by July 15, 2013. The IRS will begin issuing a Global Intermediary Identification Number (GIIN) to participating FFIs and deemed-compliant FFIs by October 15, 2013. FFIs will use their GIINs to satisfy reporting requirements and to identify their status to withholding agents.

The Treasury added a $50,000 exception for cash value insurance contracts in response to requests for additional exceptions for low-value accounts. The final regulations also clarify the types of financial accounts subject to FATCA and the persons that qualify as account holders.

In order to implement FATCA reporting, the IRS will revise existing forms and issue new forms, including new Form 8966 “FATCA Report.” Final versions of the revised and new forms are expected by late 2013 or early 2014.

For more information visit our website at www.dncpas.com, or call our office at 239-261-8337, Davidson and Nick CPAs has been serving Southwest Florida in helping individuals and businesses as CPAs and most trusted advisor since 1989.