All posts by Toni DeMaris

Tax Changes & Updates

WINTER MONTHS BRING BIG CHANGES IN THE TAX WORLD

The following is a summary of some of the more important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please contact us at Davidson & Nick, CPAs rtinel@dncpas.com for information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.

Delayed start date for 2014 tax filing season. In October 2013, the IRS said that the start date of the 2014 tax filing season would be delayed past the original Jan. 21, 2014 start date because of the government shutdown. However, at that time, it did not provide a specific delayed start date. It has now done so. Late in 2013, the IRS announced that the start date for the 2014 tax season would be Jan. 31, 2014. But it stressed that the Apr. 15, 2014 due date is not extended. Those unable to meet the deadline can apply for an automatic six-month extension, the IRS noted.

Guidance on the new 3.8% surtax on net investment income. The IRS has issued final and proposed regulations on the new 3.8% surtax on net investment income (NII) that first went into effect in 2013. The surtax is 3.8% of the lesser of: (1) NII, or (2) the excess of modified adjusted gross income (MAGI) over an unindexed threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 in any other case). The final regulations are voluminous and clarify many aspects of this new tax. They explain, among other items, how NII is calculated, the individuals and entities subject to or excepted from the tax, and the deductions taken into account in figuring the tax. The proposed regulations (upon which taxpayers may rely) provide guidance on the computation of NII with respect to a number of specialized provisions and situations including various payments to partners and former partners.

Guidance on the new additional Medicare tax. The IRS has issued final regulations on the new additional 0.9% Medicare (hospital insurance, or HI) tax that first applies for tax years beginning after 2012. This tax applies to individuals receiving wages with respect to employment in excess of $200,000 ($250,000 for married couples filing jointly and $125,000 for married couples filing separately). Likewise, the Medicare tax on self-employment income for any tax year beginning after Dec. 31, 2012 is increased by an additional 0.9% on self-employment income which exceeds the same thresholds as apply for employees. The regulations cover many aspects of this new tax including the employer’s withholding requirement, reporting the tax on new Form 8959, and payment of the tax by self-employed individuals who also have employment income, among other items.

-“Use-it-or-lose-it” rule relaxed for health FSAs. Last fall, the IRS modified the “use-or-lose” rule for health flexible spending arrangements (health FSAs) in order to allow, at the plan sponsor’s option, participating employees to carry over up to $500 of unused amounts remaining at year-end. Previously, any amounts that weren’t used by year-end would be forfeited. The IRS emphasized that the plan sponsor can specify a lower amount as the permissible maximum carryover amount, or it can decide to not allow any carryover at all.

-Standard mileage rates down. The optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) has decreased by 0.5¢ to 56¢ per mile for business travel after 2013. The rate for using a car to get medical care or in connection with a move that qualifies for the moving expense also has decreased by 0.5¢ to 23.5¢ per mile for 2014.

As noted by the above and other regulatory changes, there will continue to be significant changes in the tax compliance and planning world and we will continue to do our best to serve you at Davidson & Nick, CPA’s

Uncategorized

Same-Sex Marriage for Federal Tax Purposes

All Legal Same-Sex Marriages Will Be Recognized For Federal Tax Purposes effective September 16, 2013 under Revenue Ruling 2013-17 : 

The U.S. Department of the Treasury and the Internal Revenue Service recently ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.

Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income, gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

For tax year 2013 and going forward, same-sex spouses generally must file using a married filing separately or jointly filing status.  For tax year 2012 and all prior years, same-sex spouses who file an original tax return on or after Sept. 16, 2013 (the effective date of Rev. Rul. 2013-17), generally must file using a married filing separately or jointly filing status.

For tax year 2012,  same-sex spouses who filed their tax returns before September 16, 2013 may choose (but are not required) to amend their federal tax returns to file as married filing jointly or married filing separately.  Similarly, for tax years 2011 and earlier, same-sex spouses who filed their tax return timely may (but are not required to) amend their federal tax returns to file as married filing jointly or married filing separately if the statute of limitations for amending the return has not expired.   Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012.

There are additional benefits to employees and employers regarding same-sex spouse health benefits.

Furthermore, qualified retirement plans are required to comply with the following rules pursuant to Rev. Rul. 2013-17.  You should check with your Retirement Plan Administrator as to the possible benefits of this ruling.

As this can be a really good opportunity for tax savings, we encourage our clients to take advantage of this new ruling.  Please contact Maria at our office for more information.

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Upcoming Requirements of the Healthcare Reform Act for Employers

As part of the PPC Healthcare Reform Guide, we are providing guidance for the upcoming Notice of Availability of State Insurance Marketplaces. The required written notices must be provided to the employees by October 1, 2013.

Employers must notify all employees (a) of the existence of an insurance marketplace, (b) that the employee may be eligible for premium assistance and a subsidy under the marketplace, and (c) that if the employee purchases a policy through the insurance marketplace, he or she may lose the employer contribution to any health benefits offered by the employer.

• October 1, 2013 (for employees employed before October 1, 2013).

• On date of hiring, for employees hired on or after October 1, 2013. However, for 2014, a notice provided within 14 days of an employee’s start date will be considered provided at the time of hiring

Employers (including those who do not offer health coverage to their employees) must distribute the appropriate notice to all employees (regardless of plan enrollment status or part-time or full-time status). For all employees who are employed before October 1, 2013, the notice must be provided by October 1, 2013. For employees hired after September 30, 2013, the notice must be provided at the time of hiring; however, for 2014, a notice provided within 14 days of an employee’s start date will be considered provided at the time of hiring (EBSA Technical Release 2013-02). Informally, the Department of Labor (DOL) has indicated that for October-December 2013, new employees should receive the notice as soon as possible but no longer than 14 days after their start date. A separate notice does not need to be provided to employees’ dependents or other individuals who are or may become eligible for coverage under the plan but who are not employees. The DOL issued two model notices in May 2013 that may be used for current and new employees. One model is for employers who offer employer-provided health insurance coverage to some or all of their employees and the other model is for employers who do not offer employer-provided health insurance coverage.

The model notices must be revised by employers to include identifying and contact information. In addition, employers who offer health insurance coverage must provide information on which employees are offered coverage, eligibility requirements, and a statement as to whether the coverage meets the minimum value standard and whether the cost of the coverage to the employee is intended to be affordable based on the employee’s wages.

Most employers will be required to provide the notice because it applies to employers covered by the FLSA. In general, the FLSA applies to employers that have (a) one or more employees who are engaged in commerce and (b) gross annual sales of $500,000 or more. The FLSA is enforced by the Department of Labor (DOL), which has guidance relating to the applicability of the FLSA in general including a compliance assistance tool to determine applicability of the FLSA at www.dol.gov/elaws/esa/flsa/scope/screen24.asp

Uncategorized

Business Census Forms Overdue

The Census Bureau would like to remind businesses to fill out their 2012 census forms because they are overdue.

Last fall, the U.S. Census Bureau mailed 2012 Economic Census forms to more than 4 million businesses. The Census Bureau pointed out that reliable statistics are needed for economic development, decision making and strategic planning.

The Economic Census is the U.S. government’s official five-year measure of American business and the economy. For those businesses that have responded to the Economic Census, the Census Bureau thanks them. But for those businesses that were mailed a form but have not yet responded to the survey, the Census Bureau is urging them to do so as soon as possible.

The census law (Title 13, United States Code, Section 224), coupled with the Sentencing Reform Act of 1984 (Title 18, Sections 3551, 3559, and 3571), provides for penalties of up to $5,000 for failure to report, and $10,000 for intentionally providing false information.

Our firm is available to assist you in completing this form.
Please contact our office at 239-261-8337 for more information.
Tax Tips

Did you know?

That certain individuals are exempt from U.S. Social Security and Medicare taxes?

In general aliens performing services in the United States as employees are liable for U.S. Social Security and Medicare taxes. Certain classes of nonimmigrants and nonresident aliens are exempt from U.S. Social Security and Medicare taxes.

Nonresident aliens, in general, are also liable for Social Security/Medicare Taxes on wages paid to them for services performed by them in the United States, with certain exceptions based on their nonimmigrant status.

Who are they?

  • A-visas. Employees of foreign governments are exempt on salaries paid to them in their official capacities as foreign government employees.
    • The exemption does not automatically apply to servants of employees of such foreign governments.
    • The exemption does not apply to spouses and children of A nonimmigrants who are employed in the United States by anyone other than a foreign government.
  • D-visas. Crew members of a ship or aircraft may be exempt if the vessel is a foreign vessel and the employer is a foreign employer, or if the services are performed outside of the United States.
    • Crew members of an American vessel or aircraft who perform services within the United States ARE subject to Social Security and Medicare taxes.
    • Crew members of an American vessel or aircraft who perform services outside the United States ARE subject to Social Security and Medicare taxes if:
      • the employee signed on the vessel or aircraft in the United States; or
      • the employee signed on the vessel or vessel outside the United States but the vessel or aircraft touches a U.S. port while he is employed thereon.
  • F-visas, J-visas, M-visas, Q-visas. Nonresident Alien students, scholars, professors, teachers, trainees, researchers, physicians, au pairs, summer camp workers, and other aliens temporarily present in the United States in F-1,J-1,M-1, or Q-1/Q-2 nonimmigrant status are exempt on wages paid to them for services performed within the United States as long as such services are allowed by USCIS for these nonimmigrant statuses, and such services are performed to carry out the purposes for which such visas were issued to them.
    • Exempt Employment includes:
      • On-campus student employment up to 20 hours a week (40 hrs during summer vacations).
      • Off-campus student employment allowed by USCIS.
      • Practical Training student employment on or off campus.
      • Employment as professor, teacher or researcher.
      • Employment as a physician, au pair, or summer camp worker.
    • Limitations on exemption:
      • The exemption does not apply to spouses and children in F-2, J-2, M-2, or Q-3 nonimmigrant status.
      • The exemption does not apply to employment not allowed by USCIS or to employment not closely connected to the purpose for which the visa was issued.
      • The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 nonimmigrants who change to an immigration status which is not exempt or to a special protected status.
      • The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 nonimmigrants who become resident aliens.
  • G-visas. Employees of international organizations are exempt on wages paid to them for services performed within the United States by employees of such organizations.
    • The exemption does not automatically apply to servants of employees of such international organizations.
    • The exemption does not apply to spouses and children of G nonimmigrants who are employed in the United States by anyone other than an international organization.
  • H-visas. Certain nonimmigrants in H-2 and H-2A status are exempt as follows:
    • An H-2 nonimmigrant who is a resident of the Philippines and who performs services in Guam.
    • An H-2A nonimmigrant admitted into United States temporarily to do agricultural labor

 

Source used: www.irs.gov