816-741-7882
Professional services with a personal touch.

Affordable Care Act

01/06/2017

2017 Tax Rates (If Nothing Changes)

Income tax graphicPending any immediate changes under a new administration, tax officials say low inflation rates will ensure that current tax brackets and most other tax system features will change only slightly in 2017 with the exception of effects of health coverage mandates.

The standard deduction will rise $50 for individuals to $6,350 from $6,300.  The personal exemption increased $4,050 in 2016 and will remain the same in 2017. The standard deduction for married filing jointly rises $100 to $12,700.

The personal exemption for tax year 2017 remains at $4,050.  However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly).

But for those taxpayers who do not maintain the minimum essential health coverage in 2017, the penalty which is collected by the IRS will increase significantly. The charge for failing to have qualified health insurance coverage will be $695 or 2.5% of income for individuals and $2,085 or 2.5% of income for families.  The penalty was $325 for individuals and $975 for families in 2015. That was an increase from the penalty of $95 for individuals or $285 for families in 2014.

The 2017 top individual tax rate of 39.6% will apply to income above $470,000 for married couples, up
from $466,950.  The Affordable Care Act (ACA) or ‘Obamacare’ mandates that high-income taxpayers pay another 3.8% surtax on net investment income, so the top federal income tax rate for individuals is actually 43.4% and will remain at that level pending a possible ACA repeal.

Qualified dividends and long-term capital gains are also taxed an additional 15% or 20% depending upon income and are subject to another 3.8% net investment income tax.

Estates of decedents who die during 2017 have a basic exclusion amount of $5,490,000, up from a total of $5,450,000 for estates of decedents who died in 2016.

These rates are set to apply to 2017 taxes which will be filed in early 2018.

Call us at McRuer CPAs if you have any questions: 816.741.7882 or contact us online by clicking here.

11/30/2016

Trump's Take on Taxes

President-Elect Donald Trump’s tax plan promises to take a hatchet to the current tax code affecting individuals and businesses alike.  Experts and analysts have varied views about what his administration will do and how soon, but they agree that the Republican control of both the House and Senate will enable faster action and more radical moves.

Trump speakingComprehensive tax plans which would reduce tax rates for individuals and businesses while eliminating many deductions and tax breaks have been in the works, but politics prevented their introduction.  Because most of this legislation has already been written, pulling together the plans into a Trump-approved tax bill for debate could happen at lightning speed.

Considering ordinary income taxes only, the current tax code charges individuals complicated graduated tax rates from 10% to 39.6%.  Trump’s proposal includes only three individual income tax brackets: 12%, 25% and 33%.  Itemized deductions would be capped or no longer allowed and personal exemptions would be eliminated.

Under the Trump tax plan business taxes would be slashed and corporations would pay 15% instead of 35% on earnings.  A more simplified tax structure would eliminate most business deductions including interest on debt.  Depreciation of assets would also be calculated differently through a more limited and simplified tax code.

Trump plans to eliminate estate taxes which currently charge 40% tax on assets above $5.45 million.  His plan would still allow an income tax on the appreciation inherent in the assets for larger estates that would be paid when the assets are sold by the beneficiary.

America’s new President is set to be sworn in January 20th.  In the footsteps of two former Presidents, John F. Kennedy and Herbert Hoover, as billionaire real estate mogul Trump has opted to forego the annual Presidential salary of $400,000.  He is quickly putting together a team of lawmakers who will fulfill his campaign promises to slash taxes and repeal major provisions of the Affordable Care Act (see more below in “2017 Tax Rates (If Nothing Changes)”) among his first days in office.

This is a good time to review and understand your options. Contact us now to confirm your year-end tax planning session and we’ll help you determine the best tax strategy during changing times.

01/26/2016

New ACA-Related Tax Forms on Their Way

Your 2015 individual income tax return may need to include new documentation to meet the requirements of the Affordable Care Act (ACA).  For the first time,   Taxpayers may need to file the new forms with their 2015 federal income tax returns or keep the information with their tax records.

Enews pic affordable-care-act-logo-obamacareThis requirement is part of the ACA mandate that all Americans have “minimum essential coverage” under the federal health insurance law. If you do not have the minimum required coverage, you will need to prove you qualify for an exemption or pay a shared responsibility payment when you file your tax return.

What’s new for the filing of 2015 individual federal income tax returns is that qualifying taxpayers should be receiving the new tax information Forms 1095-A, 1095-B, or 1095-C. Taxpayers who may qualify for a premium tax credit should wait to receive a Form 1095-A before filing their tax return. Other taxpayers who are not seeking a credit are not required to submit the forms they may receive, but should keep the records on hand in case they need to verify their health insurance coverage if audited.

Businesses, the Marketplace (which is government managed) and employers who are providing health coverage plans or options to employees bear the responsibility of completing and sending new forms.

Form 1095-A

The new Form 1095-A is called the Health Insurance Marketplace Statement. Taxpayers who are enrolled in coverage through the Marketplace must file a tax return using Form 1095-A if they qualify for a premium tax credit and reimbursement of any advance payments made in 2015. This new form is created and sent from the Marketplace and should be sent by mail to qualifying taxpayers by early February.

It is possible that a taxpayer’s household will receive more than one Form 1095-A. This may happen if more than one policy covers people in the same household, if any household member switched plans in 2015, or had a life change after their coverage began (such as getting married or the addition or deletion of a dependent). Make certain the dates reflected on the form(s) include the correct start and end dates of coverage as well as the correct number of people in the household.

Form 1095-B

The new Form 1095-B is a form that is compiled and sent from health care insurance providers to individuals documenting the nature and duration of coverage. Though for the first time providers are required to send these forms, the forms are not yet required to be included with a federal income tax return. Taxpayers are urged not to wait to receive this new form before filing their return, but rather to file on time and then keep the Form 1095-B with their tax records should the documentation be needed later.

As with 2014 individual federal tax returns, other documents may be used to prove a taxpayer has the minimum essential health insurance coverage. Among statements that may prove a taxpayer and/or a member of the taxpayer’s family has health care coverage are:

  • Insurance cards
  • Explanation of benefits
  • Statements from an insurer
  • W-2 reflecting health insurance deductions
  • Payroll statement reflecting health insurance deductions

Form 1095-C

The new Form 1095-C is a form that is compiled and sent by employers who provide health insurance and coverage to certain employees. The form includes details about the type of coverage, the insured who were covered and for how long. This form can be used to determine whether a person qualifies for a premium tax credit, and to prove whether an employer offered that person and/or family members “self-insured coverage”.

For now, you should wait for one of these new forms to arrive before preparing and filing your tax return only if you wish to receive a tax credit. For more information on gathering your health insurance coverage documentation, click here.

If you need more information, please contact one of our tax preparation experts at McRuer CPAs.

01/15/2016

Tax Extenders & The Deficit Dilemma

Though Congress has received some applause for reviving a set of more than 50 tax breaks, called “tax extenders,” there is as much dismay-driven head shaking over the fact that the bipartisan agreement and the now signed budget bill dig the federal deficit hole even deeper.

The new tax law, entitled the Protecting Americans from Tax Hikes (PATH) Act of 2015, and the newly signed funding bill provide $1.1 trillion to cover spending for most government agencies to the end of fiscal year 2016, perhaps coincidentally past the upcoming presidential election. The defense sector, NASA, the Food and Drug Administration and the National Institutes of Health received a bit of a boost with most other agency funding remaining flat. ENews 2016 pic tax-credit3

IRS funding restrictions remain, so it’s expected that taxpayers will continue experiencing communication and customer service problems and an increase in computer-generated correspondence audits throughout 2016 and 2017. The new National Taxpayer Advocate Annual Report to Congress blasts the IRS for planning to “substantially reduce telephone and face-to-face interaction with taxpayers,” turning that job over to tax return preparers and tax software companies.

Meanwhile, the good news for taxpayers is that the PATH Act makes permanent several charitable tax provisions, indicating that lawmakers support using tax incentives to encourage charitable giving. For example, those 70 ½ or older may contribute up to $100,000 from an IRA directly to a charity with the contribution qualifying for their required minimum distribution (also known as Qualified Charitable Distribution (QCD) rules).

Other permanently renewed tax provisions include the American Opportunity Tax Credit for college expenses and the deduction for state and local sales taxes. The schoolteacher expense deduction has been enhanced and made permanent, as has the child tax credit.

The mortgage insurance premiums and qualified residence interest deductions have been extended for another year. Taxpayers who suffered losses from selling their home for less than the outstanding mortgage will also be able to avoid the tax consequences from debt cancellation under the Mortgage Debt Relief Act for another year.

Companies that utilize bonus depreciation like those involved in the telecommunications industry or who invest in capital-intensive projects will continue enjoying this helpful tax provision for a few more years. The tax law also makes permanent the research and development tax credit, which encourages important business R&D like that in the pharmaceutical and defense sectors.

The solar investment tax credit (ITC) and the wind production tax credit (PTC) are being phased out but will remain active through 2019 and 2021 respectively. The energy industry overall has received both tax incentives and funding resources, adding a boost of confidence to alternative energy producers.

Tax increases levied on individuals and businesses to pay for the Affordable Care Act (Obamacare) continue to be unpopular, and some were not enacted. Now it’s possible the two most controversial taxes may be repealed. These are the proposed tax on medical devices and the 40% excise “Cadillac” taxes on higher-priced employer-sponsored health plans that compete with government-sponsored plans.

The 2015 year-end budget battle, which starts our new tax year without delays, was a fistfight compared to the combative, destructive delay-causing 2014 debate. Yet, even as lawmakers are cooling to budget debates, the looming budget deficit has not disappeared and continues to grow. Our 2016 budget will add to the deficit, rather than reduce it. The Congressional Budget Office reports that overall US Treasury debt has grown to 74% of GDP that “could have serious negative consequences for the nation, including restraining economic growth in the long term ... and eventually increasing the risk of financial crisis.”

Overall, the bipartisan tax bill was passed with the understanding that Congress is committed to comprehensive tax reform that will simplify the tax code, eliminate temporary provisions and lower tax rates by broadening the tax base. Lawmakers who supported the PATH Act stated in a news release, “Americans deserve a simpler, fairer and flatter tax code that’s built for growth, and this bill will help make that possible.” The 2016 election year will likely determine how far that ship will sail.

If you have any questions about how the current tax law affects your individual and/or business tax obligation, please contact us now at McRuer CPAs for a tax planning session.

03/16/2015

Obamacare Court Battle

Now that arguments have been made before U.S. Supreme Court justices in the battle over the legality of Obamacare-related public subsidies (King v Burwell), predictions about the impact of their decision are taking shape. The nation’s highest court is requested to determine whether federal subsidies to help pay for health care coverage can be legally issued in the 36 states that did not form exchanges offering health insurance.

ACA Graphic Stethoscope on FlagThe Court’s decision is expected in late June.  If it rules in favor of the federal government’s Affordable Care Act mandates, it will become more entrenched into law and states will be required to take action to set up state exchanges.  If the court rules in favor of the plaintiffs, the law’s operating foundation for keeping insurance affordable may be negated, thereby basically shutting down the national health care insurance program.

Currently, government numbers show 7 million people have requested the subsidies in order to pay for part or all of their health insurance premiums. Without the subsidies, many in this group may be forced to opt out of buying health insurance altogether and will claim the “hardship exemption".  They would, in effect, be returning to the same status they had (no health insurance coverage) before the Affordable Care Act was available.

The more people who use the hardship exemption, the weaker the participation rate; resulting in higher premium costs for those who are insured via the exchanges.  Insurance companies say because they must offer insurance to everyone, that scenario may mean predominantly sick people will buy health insurance on the exchanges, causing everyone’s rates to rise.  Higher rates may cause more people to drop out of the exchanges and so on.

For the 36 states that have not set up their own exchanges, a ruling for the government means they will have to create exchanges in order for their residents to receive federal subsidies. Many states already tried to create the exchanges when the ACA was first enacted, but were plagued by operational and technological problems as well as funding needs they considered unsustainable.

Officials on both sides of the issue predict it would be several years before the exchanges could be operational, leaving a long-term coverage gap and causing more rate hikes that could challenge the ACA’s viability nationally.

The actual cost to individuals of the Affordable Care Act is constantly adjusting as many Americans are signing up through those exchanges that do exist in their states because of deadline pressures as shown in a recent analysis by Forbes business magazine.

Congressional action remains stalled with Democrats wanting to strengthen some mandates of the law while some Republicans are fighting to repeal or defund it and implement an as-yet-to-be-detailed alternative system.  Either way, the decision this June will have historical significance.

Meanwhile, regarding this tax season and your 2014 individual income tax returns, the law requires you and everyone reported on your return to confirm you have health care coverage or qualify for an exemption.  Otherwise, the IRS will collect a “payment” from you (which most regard as a tax) as mandated by the Individual Shared Responsibility Provision.

If you have any questions about how the Affordable Care Act is affecting you or your business, please contact us at McRuer CPAs online or call us at 816.741.7882 and one of our tax experts can help you.

02/10/2015

What is Minimum Essential Coverage Under the Affordable Care Act?

The IRS has issued new information on how to interpret "Minimum Essential Coverage" under the Affordable Care Act.

Many individuals and businesses have been concerned about having the right kind of "qualifying" health care coverage for themselves and their employees.  Here is the latest notice about Minimum Essential Coverage from the IRS that may be helpful as 2014 federal income tax returns are being prepared and tax plans are being implemented for the 2015 tax year.  If it sounds complicated, it can be. If you have any questions or need to design a tax plan to cover this and many more important issues as you prepare your tax return, contact us and we'll help you with a confidential consultation to review all your options.  You may also consider using the services of a professional team like ours for your tax preparation needs.

 

Accountants workingIRS Release:

Individual Shared Responsibility Provision - Minimum Essential Coverage

The individual shared responsibility provision requires you and each member of your family to have qualifying health care coverage (known as minimum essential coverage), qualify for an exemption from the responsibility to have minimum essential coverage, or make an individual shared responsibility payment when you file your federal income tax return. If you are not required to file a tax return and don’t want to file a return, you do not need to file a return solely to report your coverage.

The chart shows some types of coverage that qualify as minimum essential coverage and some that do not.

Coverage TypeQualifies As Minimum Essential CoverageDoesn't Qualify As Minimum Essential Coverage

Employer-sponsored coverage:

  • Group health insurance coverage for employees under –
  • A governmental plan, such as the Federal Employees Health Benefit program
  • A plan or coverage offered in the small or large group market within a state
  • A grandfathered health plan offered in a group market
  • A self-insured group health plan for employees
  • COBRA coverage
  • Retiree coverage

 

Yes
 

Individual health coverage:

  • Health insurance you purchase directly from an insurance company
  • Health insurance you purchase through the Health Insurance Marketplace
  • Health insurance provided through a student health plan
  • Health coverage provided through a student health plan that is self-funded by a university (only for a plan year beginning on or before December 31, 2014, unless recognized as minimum essential coverage by HHS)
  • Catastrophic plans
Yes  

Coverage under government-sponsored programs:

  • Medicare Part A coverage
  • Medicare Advantage plans
  • Most Medicaid coverage
  • Children’s Health Insurance Program (CHIP)
  • Most types of TRICARE coverage
  • Comprehensive health care programs offered by the Department of Veterans Affairs
  • State high-risk health insurance pools (only for a plan year beginning on or before December 31, 2014, unless recognized as minimum essential coverage by HHS)
  • Health coverage provided to Peace Corps volunteers
  • Department of Defense Nonappropriated Fund Health Benefits Program
  • Refugee Medical Assistance
Yes  

Other coverage:

  • Certain foreign coverage
  • Certain coverage for business owners
Yes  

Certain coverage that may provide limited benefits:

  • Coverage consisting solely of excepted benefits, such as:
    • Stand-alone dental and vision insurance
    • Accident or disability income insurance
    • Workers' compensation insurance
  • Medicaid providing only family planning services*
  • Medicaid providing only tuberculosis-related services*
  • Medicaid providing only coverage limited to treatment of emergency medical conditions*
  • Pregnancy-related Medicaid coverage*
  • Medicaid coverage for the medically needy*
  • Section 1115 Medicaid demonstration projects*
  • Space available TRICARE coverage provided under chapter 55 of title 10 of the United States Code for individuals who are not eligible for TRICARE coverage for health services from private sector providers*
  • Line of duty TRICARE coverage provided under chapter 55 of title 10 of the United States Code*
  • AmeriCorps coverage for those serving in programs receiving AmeriCorps State and National grants
  • AfterCorps coverage purchased by returning members of the PeaceCorps

*In Notice 2014-10, the IRS announced relief from the individual shared responsibility payment for months in 2014 in which individuals are covered under one of these programs. See the instructions for Form 8965, Health Coverage Exemptions, for information on how to claim an exemption for one of these programs on your income tax return.

 

 

Yes

 

 

02/09/2015

Employer Health Care Choices Raise Questions

With the launch of tax season, employers are asking a flood of questions about mandates in the Affordable Care Act (ACA aka ObamaCare ) and whether they are understanding the choices that are available.  

The Employer Shared Responsibility provisions became effective January 1st of 2015.  No Employer Shared Responsibility payments will be assessed for 2014, but employers are expected to use their 2014 number of employees and their hours of service to determine whether they are subject to the payments in 2015.

ACA in washingtonBusinesses in 2015 employing generally 50 full-time employees, or a combination of full-time and part-time employees that is equivalent to 50 full-time employees, will be subject to the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code.   The IRS defines a full-time employee as an individual employed on average at least 30 hours of service per week.

The IRS says, "Under the Employer Shared Responsibility provisions, if these employers do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees (and their dependents), the employer may be subject to an Employer Shared Responsibility payment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges, also called a Health Insurance Marketplace (Marketplace)."

New Questions

One of the many issues that employers are asking about has to do with acceptable alternatives to providing a company health insurance plan for employees.  

Some businesses are asking if reimbursements to employees for premiums those employees may pay for health insurance (whether it is purchased through the ACA Marketplace or outside the Marketplace) is enough to meet regulations.  The IRS says an employer payment plan generally does NOT include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in case compensation.

Here is an IRS which provides a question and answer section on this issue:

"Q1.  What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?

Under IRS Notice 2013-54, such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing.  Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms.  Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.

Q2. Where can I get more information?

On Sept. 13, 2013, the IRS issued Notice 2013-54, which explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy.

The Department Labor (DOL) has issued a notice in substantially identical form to Notice 2013-54, DOL Technical Release 2013-03. On Jan. 24, 2013, DOL and HHS issued FAQs that address the application of the Affordable Care Act to HRAs. On Nov. 6, 2014, DOL issued additional FAQs that address the application of the Affordable Care Act to HRAs and other payment arrangements."

There are a number of questions related to the ACA you may have, whether you employ 3 or 300 or 30,000 workers.  Answers depend upon a number of factors and can have a number of financial consequences.  Contact us at McRuer CPAs for a session with one of our tax experts to help you have confidence the decisions you make will be the best for the bottom line of your business.

RSS Feed

Welcome from Scott McRuer
& the McRuer CPAs Team

Scott McRuer
Learn more about Scott

Follow Scott and his team on your favorite social media

Facebook LinkedIn YouTube