|Is your business ready for play-or-pay?|
|If you’re a “large” employer, time is running out to prepare for the Affordable Care Act’s (ACA’s) shared responsibility provision, commonly referred to as “play-or-pay.” It’s scheduled to go into effect in 2015.Under transitional relief the IRS issued earlier this year, for 2015, large employers generally include those with at least 100 full-time employees or the equivalent, as defined by the ACA. However, the threshold is scheduled to drop to 50 beginning in 2016, and that threshold will apply beginning in 2015 for the ACA’s information-reporting provision.The play-or-pay provision imposes a penalty on large employers if just one full-time employee receives a premium tax credit. The credit is available to employees who enroll in a qualified health plan through a government-run Health Insurance Marketplace and meet certain income requirements — but only if:
The IRS has issued detailed guidance on what these terms mean and how employers can determine whether they’re a large employer and, if so, whether they’re offering sufficient coverage to avoid the risk of penalties.
Author Archives: jemvaughn
|If you’ve put your home on the market, you need to know the tax consequences of a sale|
|Summer is a common time to put a home on the market. If you’re among those who are following this trend, it’s important to be aware of the tax consequences.If you’re selling your principal residence, you can exclude up to $250,000 ($500,000 for joint filers) of gain — as long as you meet certain tests. Gain that qualifies for exclusion also is excluded from the Affordable Care Act’s 3.8% net investment income tax.
A loss on the sale of your principal residence generally isn’t deductible. But if part of your home is rented out or used exclusively for your business, the loss attributable to that portion may be deductible.
If you’re selling a second home, be aware that it won’t be eligible for the gain exclusion. But if it qualifies as a rental property, it can be considered a business asset, and you may be able to defer tax on any gains through an installment sale or a Section 1031 exchange. Or you may be able to deduct a loss.
If you have a home on the market, please contact us to learn more about the potential tax consequences of a sale.
|With the gift and estate tax exemptions currently at $5.34 million, you might think that estate valuations are less important. But even if you believe that your estate’s value is under the exemption amount, it’s still important to know the value of your assets.First, your estate might be worth more than you think. For example, if you own an insurance policy on your life, the death benefit will be included in your estate, which may be enough to trigger estate tax liability.Second, obtaining a qualified appraisal can limit the IRS’s ability to revalue your assets. If you make gifts that exceed the $14,000 annual gift tax exclusion, you’ll need to file a gift tax return, even if the gift is within your lifetime exemption. Generally, the IRS has three years to audit gift tax returns and challenge reported values for gifted assets. But that period doesn’t begin until the gift has been “adequately disclosed.”For assets that are difficult to value — such as closely held business interests or real estate — the best way to satisfy the adequate-disclosure requirements and avoid an IRS challenge is to include a qualified professional appraisal with your return.
Please contact us for more information on properly valuing your assets. We can help you comply with IRS requirements and keep taxes to a minimum.
Have you misclassified employees as independent contractors?
An employer enjoys several advantages when it classifies a worker as an independent contractor rather than as an employee. For example, it isn’t required to pay payroll taxes, withhold taxes, pay benefits or comply with most wage and hour laws. However, there’s a potential downside: If the IRS determines that you’ve improperly classified employees as independent contractors, you can be subject to significant back taxes, interest and penalties.
To determine whether a worker is an employee or an independent contractor, the IRS considers three categories of factors related to the degree of control and independence:
1. Behavioral. Does the employer control, or have the right to control, what the worker does and how the worker does his or her job?
2. Financial. Does the employer control the business aspects of the worker’s job? Does the employer reimburse the worker’s expenses or provide the tools or supplies to do the job?
3. Type of relationship. Will the relationship continue after the work is finished? Is the work a key aspect of the employer’s business?
Determining the proper classification under these factors may not be easy. If you’re concerned you may have misclassified workers, please contact us.
First and foremost, don’t take a lump-sum distribution from your old employer’s retirement plan. It generally will be taxable and, if you’re under age 59½, subject to a 10% early-withdrawal penalty. Here are three alternatives:
1. Stay put. You may be able to leave your money in your old plan. But if you’ll be participating in your new employer’s plan or you already have an IRA, keeping track of multiple plans can make managing your retirement assets more difficult. Also consider how well the old plan’s investment options meet your needs.
2. Roll over to your new employer’s plan. This may be beneficial if it leaves you with only one retirement plan to keep track of. But evaluate the new plan’s investment options.
3. Roll over to an IRA. If you participate in a new employer’s plan, this will require keeping track of two plans. But it may be the best alternative because IRAs offer nearly unlimited investment choices.
There are additional issues to consider when deciding what to do with your old retirement plan. We can help you make an informed decision — and avoid potential tax traps.
A great way to save some money on taxes if you own property. It basically moves the depreciation forward so you get the benefit now rather than later. Call us about it.
|The passing of Memorial Day marks the beginning of summer in the minds of many Americans. Although the kids might still be in school for another week or two, summer day camp is rapidly approaching for many families. Summer Camp — might save you taxes, what a great double benefit. If yours is among them, did you know that sending your child to day camp might make you eligible for a tax break?
Day camp is a qualified expense under the child and dependent care credit, which is worth 20% of qualifying expenses (more if your adjusted gross income is less than $43,000), subject to a cap. For 2014, the maximum expenses allowed for the credit are $3,000 for one qualifying child and $6,000 for two or more.
Be aware, however, that overnight camp costs don’t qualify for the credit.
Additional rules apply, so please contact us to determine whether you’re eligible.
If you still file a paper return, it’s important to know the IRS’s “timely mailed = timely filed” rule: If your tax return is due April 15, it’s considered timely filed if it’s postmarked by midnight on April 15. But just because you drop your return in a mailbox on the 15th doesn’t mean you’re safe.
Consider this example: On April 15, Susan mails her federal tax return with a payment. The post office loses the envelope and, by the time Susan realizes what has happened and refiles, two months have gone by. She’s hit with failure-to-file and failure-to-pay penalties totaling $1,000.
To avoid this risk, use certified or registered mail. Alternatively, you can use one of the private delivery services designated by the IRS to comply with the timely filing rule, such as DHL Same Day service. FedEx and UPS also offer a variety of options that pass muster with the IRS. But beware: If you use an unauthorized delivery service — such as FedEx Express Saver® or UPS Ground — your document isn’t “filed” until the IRS receives it.
If you haven’t filed your return yet and are concerned about meeting the deadline, another option is to file for an extension. Doing so has both pluses and minuses, depending on your situation. Please contact us if you have questions about what you should do to avoid penalties for failing to file or pay.