Category Archives: Tax Changes & Updates

Disaster Relief

Dear Clients, Colleagues and Friends,

On September 29, President Trump signed into law P.L. 115-63, the “Disaster Tax Relief and Airport and Airway Extension Act of 2017.” The Act, which provides temporary tax relief to victims of Hurricanes Harvey, Irma, and Maria.

  • Businesses that qualify for relief may claim a new “employee retention tax credit” of up to $2,400 for qualified wages paid per eligible employee.
  •  Relief for individuals includes, among other things:
  • Personal casualty losses WILL NOT be subject to the phaseout of 10% of adjusted gross income
  • tax-favored withdrawals from retirement plans
  • the option of using current or prior year’s income for purposes of claiming the earned income and child tax credits.

Please contact our offices to schedule an appointment should you wish to discuss how any of these provisions may be of benefit to you or your business.

How Hurricane Irma Impacts Your 2016 Income Taxes

Dear Clients and Friends;

We hope you and your families are safe and sound after hurricane Irma. As our neighborhoods and communities recover, we’d like to remind you of a few income tax considerations related to some of the hardships and losses you may be facing because of the storm;

• Taxpayer’s affected by Hurricane Irma will have until January 31, 2018, to file their 2016 returns.

• Damage to your personal residence and personal property is deductible as an itemized.
deduction, subject to certain limits, to the extent it is not reimbursed by insurance.

• Damage to business assets is deductible to the extent it is not reimbursed by insurance AND taxpayer’s have two years to reinvest insurance proceeds to defer any gains realized because of insurance proceeds received in excess of the adjusted basis of the business property.

• Taxpayer’s may have the option of deducting the hurricane losses on their 2016 or 2017 tax returns which would allow for the deduction to be taken in the year in which the taxpayer would get the most benefit.

• Be careful of solicitations from organizations regarding charitable donations towards hurricane relief and/or companies offering to do repair work on your property. There will be a lot of imposters out there attempting to scam you out of your money.

Please don’t hesitate to contact us with any questions you may have regarding these or any other hurricane related issues.

Thank you
Davidson and Nick, CPA’s


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 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

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 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 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 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, 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.

2012 Tax Rates

Congress enacts 2012 American Taxpayer Relief Act –Today’s Blog- Tax rates

 The recently enacted 2012 American Taxpayer Relief Act is a sweeping tax package that included, among many other items revised tax rates on ordinary and capital gain income for 2013. The changes are significant and subsequent blogs will address estate taxes AMT relief, write-offs etc and the other items that Congress has enacted. However, I will not be able to explain in this blog the “relief” part of the relief Act.

  •  Tax rates. For tax years beginning after 2012, the 10%, 15%, 25%, 28%, 33% and 35% tax brackets from the Bush tax cuts will remain in place and are made permanent. This means that, for most Americans, the tax rates will stay the same. However, there will be a new 39.6% rate, which will begin at the following thresholds: $400,000 (single), $425,000 (head of household), $450,000 (joint filers and qualifying widow(er)s), and $225,000 (married filing separately). These dollar amounts will be inflation-adjusted for tax years after 2013.
  • Capital gains and qualified dividends rates. The new law retains the 0% tax rate on long-term capital gains and qualified dividends, modifies the 15% rate, and establishes a new 20% rate. Beginning in 2013, the rate will be 0% if income falls below the 25% tax bracket; 15% if income falls at or above the 25% tax bracket but below the new 39.6% rate; and 20% if income falls in the 39.6% tax bracket. It should be noted that the 20% top rate does not include the new 3.8% surtax on investment-type income and gains for tax years beginning after 2012, which applies on investment income above $200,000 (single) and $250,000 (joint filers) in adjusted gross income. So actually, the top rate for capital gains and dividends beginning in 2013 will be 23.8% if income falls in the 39.6% tax bracket. For lower income levels, the tax will be 0%, 15%, or 18.8%.

For more information visit our website at Davidson and Nick CPAs has been serving Southwest Florida in helping individuals and businesses as CPAs and most trusted advisor since 1989.