Small Business & Obamacare

1.  Businesses with Fewer than 25 Employees- Small Business Tax Credits

The Affordable Care Act does not require that businesses provide health insurance.

·         But it does offer tax credits for eligible small businesses that choose to provide insurance to their employees. 

·         To qualify for a small business tax credit of up to 35% (up to 25% for non-profits), you must have:

-           Fewer than 25 full-time equivalent employees

-           Pay average annual wages below $50,000

-           Contribute 50% or more toward employee health insurance premiums

-           Beginning in 2014, this tax credit goes up to 50% (35% for non-profits) and is available to qualified small businesses who participate in the Small Business Health Options Program (SHOP) Exchanges.

2. Businesses with 50 or Fewer Employees- Affordable Insurance Marketplaces

The Affordable Care Act does not require that businesses provide health insurance.

·         But beginning in 2014, small businesses with generally 50 or fewer employees will be able to purchase coverage through SHOP. 

·         Competitive marketplaces where small employers can go to find health coverage from a selection of providers. 

·         The SHOP Marketplaces and Individual Marketplaces for those who are self-employed open on January 1, 2014.

-           Open enrollment begins on October 1, 2013. 

-           SHOP will offer small businesses increased purchasing power similar to that of large businesses.

3.  Businesses with 50 or More Employees- Employer Shared Responsibility Provisions

Employers are not required to provide coverage to their employees under the Affordable Care Act.  

·         However, beginning in 2014, businesses with 50 or more full-time employees (or full-time equivalents)

·         that do not offer affordable health insurance that provides a minimum level of coverage to substantially all of their full-time employees (and their dependents)

·         may be subject to an employer shared responsibility payment

·         if at least one of their full-time employees receives a premium tax credit to purchase coverage in an insurance Marketplace. 

-           A full-time employee is generally one who is employed an average of 30 or more hours per week. 

from article by Meredith Olafson:

Medical & Dental Expenses

If you paid for medical or dental expenses in 2012, you may be able to get a tax deduction for costs not covered by insurance.

1. You must itemize. 

·         You can only claim medical and dental expenses for costs not covered by insurance if you itemize deductions on your tax return. 

2. Deduction is limited. 

·         You can deduct medical and dental expenses that are more than 7.5 percent of your adjusted gross income.

3. Expenses paid in 2012. 

·      You can include medical and dental costs that you paid in 2012, even if you received the services in a previous year. 

4. Qualifying expenses. 

·       You may include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. 

5. Costs to include. 

·       You can normally claim the costs of diagnosing, treating, easing or preventing disease. The costs of prescription drugs and insulin qualify. The cost of medical, dental and some long-term care insurance also qualify.

6. Travel is included. 

·       You may be able to claim the cost of travel to obtain medical care. That includes the cost of public transportation or an ambulance as well as tolls and parking fees. If you use your car for medical travel, you can deduct the actual costs, including gas and oil. Instead of deducting the actual costs, you can deduct the standard mileage rate for medical travel.

7. No double benefit. 

·    Funds from Health Savings Accounts or Flexible Spending Arrangements used to pay for medical or dental costs are usually tax-free. Therefore, you cannot deduct expenses paid with funds from those plans.

from IRS Tax Tip 2013-25:

Deducting Charitable Contributions

Giving to charity may make you feel good and help you lower your tax bill. The IRS offers these nine tips to help ensure your contributions pay off on your tax return.

1. If you want a tax deduction, you must donate to a qualified charitable organization, not an individual, a political organization or a political candidate

2. You must file Form 1040 and itemize your deductions on Schedule A.

·         If your total deduction for all noncash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return.

3. If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you received.  

4. Donations of stock or other non-cash property are usually valued at fair market value. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.

5. Fair market value is generally the price at which someone can sell the property.

6. You must have a written record of your donation that includes the name of the organization, the date and amount of the contribution about in order to deduct any cash gift, regardless of the amount.

7. To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization, showing the amount of the cash or a description of any property given, and whether the organization provided any goods or services in exchange for the gift.

8. You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.

9. If you donate one item or a group of similar items that are valued at more than $5,000, you must also complete Section B of Form 8283. This section generally requires an appraisal by a qualified appraiser.

from IRS Tax Tip 2013-45:  

Home Office Deduction

If you use part of your home for your business, you may qualify to deduct expenses for the business use of your home. Here are six facts from the IRS to help you determine if you qualify for the home office deduction.

1. Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. In addition, the part of your home that you use for business purposes must also be:

·         your principal place of business, or

·         a place where you meet with patients, clients or customers in the normal course of your business, or

·         a separate structure not attached to your home. Examples might include a studio, workshop, garage or barn. In this case, the structure does not have to be your principal place of business or a place where you meet patients, clients or customers.

2. You do not have to meet the exclusive use test if you use part of your home to store inventory or product samples. The exclusive use test also does not apply if you use part of your home as a daycare facility.

3. The home office deduction may include part of certain costs that you paid for having a home. For example, a part of the rent or allowable mortgage interest, real estate taxes and utilities could qualify. The amount you can deduct usually depends on the percentage of the home used for business.

4. The deduction for some expenses is limited if your gross income from the business use of your home is less than your total business expenses.

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. Report your deduction on Schedule C, Profit or Loss From Business.

6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience.



from IRS Tax Tip 2013-36:  

Top Six Tax Tips for the Self-Employed

When you are self-employed, it typically means you work for yourself, as an independent contractor, or own your own business. Here are six key points the IRS would like you to know about self-employment and self-employment taxes:

1. Self-employment income can include pay that you receive for part-time work you do out of your home. This could include income you earn in addition to your regular job.

2. Self-employed individuals file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040.

3. If you are self-employed, you generally have to pay self-employment tax as well as income tax. Self-employment tax includes Social Security and Medicare taxes. You figure this tax using Schedule SE, Self-Employment Tax.

4. If you are self-employed you may have to make estimated tax payments. People typically make estimated tax payments to pay taxes on income that is not subject to withholding. If you do not make estimated tax payments, you may have to pay a penalty when you file your income tax return. The underpayment of estimated tax penalty applies if you do not pay enough taxes during the year.

5. When you file your tax return, you can deduct some business expenses for the costs you paid to run your trade or business. You can deduct most business expenses in full, but some costs must be ’capitalized.’ This means you can deduct a portion of the expense each year over a period of years.

6. You may deduct only the costs that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business.

from IRS Tax Tip 2013-46: 

Tax Advantages for College Cash – Series 2 of 2

The American Opportunity Credit replaces the Hope credit.  It is for full-time students and is figured per student.  Your expenses incurred during the first four years of post-secondary education are used to determine the credit with a maximum credit is $ 2,500.  Up to 40% of this credit is Refundable, meaning you could receive a $ 1,000 refund even if you owe no tax!

The Lifetime Learning Credit can be used by any student from undergraduate to graduate or even course work to improve job skills.  Plus, the student doesn't have to be enrolled full time.  However, it is by taxpayer household, not per student.  Maximum credit is $ 2,000. 

Tuition and Fees Deduction is an adjustment.  Meaning it can reduce taxable income by as much as $ 4,000.  This can be used along with Coverdell ESAs and 529 Plans, as long as you paid for different educational expenses with various funds.  There are adjusted gross income limitations.

Student Loan Interest Deduction is another adjustment, allowing a reduction of taxable income by up to $ 2,500.  It has filing status and adjusted gross income limitations.

If you cashed in Savings Bonds to pay for education expenses, the interest could be tax-free.

Extensions

The April 15 tax-filing deadline is fast approaching. Some taxpayers may find that they need more time to file their tax returns. If you need extra time, you can get an automatic six-month extension from the IRS.

Extension:  

• You can file an extension for your personal income taxes resulting in an additional six (6) months to complete your return.  
• The new due date would be Oct 15th.
• The extension is for FILING only.
• There is no extension for any balance due.  
• Balance Due Payment is still required by April 15th.

Failure to File:  

• IRS will assess a Failure to File penalty.  
• Therefore, even if you owe you can avoid this penalty by filing.

Failure to Pay.  

• IRS will assess a Failure to Pay penalty.  
• A payment plan request with your return normally eliminates this penalty.