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Posts Tagged ‘tax preparation’
Sunday, August 8th, 2010
IRS Removes Debt Indicator for 2011 Tax Filing Season
IR-2010-89, Aug. 5, 2010
WASHINGTON — The Internal Revenue Service today announced that starting with next year’s tax filing season it will no longer provide tax preparers and associated financial institutions with the “debt indicator,” which is used to facilitate refund anticipation loans (RALs).
“As we prepare for tax season every year, we look at past practices and consider whether they still make sense. We no longer see a need for the debt indicator in a world where we can process a tax return and deliver a refund in 10 days,” IRS Commissioner Doug Shulman said. “We encourage taxpayers to use e-file with direct deposit so they can get their refunds in just a few days.”
So far this year, more than 95 million tax returns have been e-filed, representing more than 70 percent of tax returns.
“Refund Anticipation Loans are often targeted at lower-income taxpayers,” Shulman said. “With e-file and direct deposit, these taxpayers now have other ways to quickly access their cash.”
The IRS has been reviewing refund settlement products, such as RALs and Refund Anticipation Checks (RACs), as part of the Return Preparer Review released in January. Specifically, the IRS announced that it would study refund settlement products.
RALs are loans secured by a taxpayer’s anticipated tax refund. Currently, tax preparers who electronically submit a client’s tax return receive in the acknowledgment file an indication of whether an individual taxpayer will have any portion of the refund offset for delinquent tax or other debts, such as unpaid child support or delinquent federally funded student loans. This acknowledgment is known as the debt indicator, and is used as an underwriting tool for RALs.
The IRS announcement would remove the debt indicator starting with the upcoming 2011 tax filing season. The IRS noted that taxpayers will continue to have access to information about their tax refunds and any offsets through the “Where’s My Refund?” service on IRS.gov.
RACs are temporary bank accounts established on behalf of a taxpayer into which a direct deposit refund can be received and out of which a bank typically issues a payment to the taxpayer.
With both RALs and RACs, tax preparation and product fees are subtracted directly from the refund, and the taxpayer does not make any “out-of-pocket” payments. They are frequently marketed to taxpayers who do not have cash to pay for professional tax preparation services.
In a related effort, the IRS plans to explore the possibility of providing a new tool for the 2012 tax filing season to give taxpayers a mechanism to use an appropriate portion of their tax refund to pay for the services of a professional tax return preparer. The IRS plans to engage with taxpayers, consumer advocates and the tax return preparer community to consider whether providing this option would be a cost-effective way for consumers to pay for tax return preparation services.
IRS Removes Debt Indicator for 2011 Tax Filing Season
IR-2010-89, Aug. 5, 2010
WASHINGTON — The Internal Revenue Service today announced that starting with next year’s tax filing season it will no longer provide tax preparers and associated financial institutions with the “debt indicator,” which is used to facilitate refund anticipation loans (RALs).
“As we prepare for tax season every year, we look at past practices and consider whether they still make sense. We no longer see a need for the debt indicator in a world where we can process a tax return and deliver a refund in 10 days,” IRS Commissioner Doug Shulman said. “We encourage taxpayers to use e-file with direct deposit so they can get their refunds in just a few days.”
So far this year, more than 95 million tax returns have been e-filed, representing more than 70 percent of tax returns.
“Refund Anticipation Loans are often targeted at lower-income taxpayers,” Shulman said. “With e-file and direct deposit, these taxpayers now have other ways to quickly access their cash.”
The IRS has been reviewing refund settlement products, such as RALs and Refund Anticipation Checks (RACs), as part of the Return Preparer Review released in January. Specifically, the IRS announced that it would study refund settlement products.
RALs are loans secured by a taxpayer’s anticipated tax refund. Currently, tax preparers who electronically submit a client’s tax return receive in the acknowledgment file an indication of whether an individual taxpayer will have any portion of the refund offset for delinquent tax or other debts, such as unpaid child support or delinquent federally funded student loans. This acknowledgment is known as the debt indicator, and is used as an underwriting tool for RALs.
The IRS announcement would remove the debt indicator starting with the upcoming 2011 tax filing season. The IRS noted that taxpayers will continue to have access to information about their tax refunds and any offsets through the “Where’s My Refund?” service on IRS.gov.
RACs are temporary bank accounts established on behalf of a taxpayer into which a direct deposit refund can be received and out of which a bank typically issues a payment to the taxpayer.
With both RALs and RACs, tax preparation and product fees are subtracted directly from the refund, and the taxpayer does not make any “out-of-pocket” payments. They are frequently marketed to taxpayers who do not have cash to pay for professional tax preparation services.
In a related effort, the IRS plans to explore the possibility of providing a new tool for the 2012 tax filing season to give taxpayers a mechanism to use an appropriate portion of their tax refund to pay for the services of a professional tax return preparer. The IRS plans to engage with taxpayers, consumer advocates and the tax return preparer community to consider whether providing this option would be a cost-effective way for consumers to pay for tax return preparation services.
Tags: 2011 tax, 2011 Tax Filing Season, 2012 tax, 2012 tax filing season, anticipated tax refund, delinquent tax, direct deposit, direct deposit refund, e file, internal revenue service, irs, IRS Commissioner Doug Shulman, irs gov, IRS Removes Debt Indicator for 2011 Tax Filing Season, professional tax preparation services, professional tax return preparer, RALs and Refund Anticipation Checks (RACs), Refund Anticipation Loans, refund anticipation loans (RALs), refund settlement products, return preparer review, tax filing season, tax preparation, tax preparers, tax refund, tax return, tax return preparation services, tax return preparer, tax returns, tax season, Where’s My Refund
Posted in Uncategorized | 9 Comments »
Thursday, August 5th, 2010
Five Tax Scams to Avoid this Summer
IRS Summertime Tax Tip 2010-08
The Internal Revenue Service issues a list of the top 12 tax scams each year – known as the Dirty Dozen. The scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. These scams don’t just happen during the tax filing season, they can happen anytime during the year. Here are five scams from the 2010 Dirty Dozen list every taxpayer should be aware of this summer.
Phishing Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information in an electronic communication. Scams can take the form of e-mails, tweets or phony websites and they try to mislead consumers by telling them they are entitled to a tax refund from the IRS and they must reveal personal information to claim it. Regardless of how official this e-mail may look and sound, the IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the personal information obtained to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name. If you receive an e-mail that you suspect is a phishing attempt or directs you to an imitation IRS website, please forward it to the IRS at phishing@irs.gov. You can also visit IRS.gov and enter the keyword phishing for additional information.
Return Preparer Fraud Dishonest tax return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers are skimming a portion of their clients’ refunds, charging inflated fees for tax preparation or are attracting new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS is requiring all paid return preparers to register with the IRS, pass competency tests and attend continuing education.
Hiding Income Offshore Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts. IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from more than 14,700 voluntary disclosures received last year. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.
Abuse of Charitable Organizations and Deductions The IRS continues to observe the misuse of tax-exempt organizations. This includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets. The IRS also continues to investigate various schemes where donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets.
Frivolous Arguments Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on IRS.gov. These arguments are false and have been thrown out of court.
Five Tax Scams to Avoid this Summer
IRS Summertime Tax Tip 2010-08
The Internal Revenue Service issues a list of the top 12 tax scams each year – known as the Dirty Dozen. The scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. These scams don’t just happen during the tax filing season, they can happen anytime during the year. Here are five scams from the 2010 Dirty Dozen list every taxpayer should be aware of this summer.
- Phishing Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information in an electronic communication. Scams can take the form of e-mails, tweets or phony websites and they try to mislead consumers by telling them they are entitled to a tax refund from the IRS and they must reveal personal information to claim it. Regardless of how official this e-mail may look and sound, the IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the personal information obtained to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name. If you receive an e-mail that you suspect is a phishing attempt or directs you to an imitation IRS website, please forward it to the IRS at phishing@irs.gov. You can also visit IRS.gov and enter the keyword phishing for additional information.
- Return Preparer Fraud Dishonest tax return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers are skimming a portion of their clients’ refunds, charging inflated fees for tax preparation or are attracting new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS is requiring all paid return preparers to register with the IRS, pass competency tests and attend continuing education.
- Hiding Income Offshore Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts. IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from more than 14,700 voluntary disclosures received last year. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.
- Abuse of Charitable Organizations and Deductions The IRS continues to observe the misuse of tax-exempt organizations. This includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets. The IRS also continues to investigate various schemes where donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets.
- Frivolous Arguments Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on IRS.gov. These arguments are false and have been thrown out of court.
Tags: Five Tax Scams to Avoid this Summer, income tax, internal revenue service, irs, irs gov, tax avoidance, tax exempt, tax exempt organizations, tax filing season, tax issues, tax preparation, tax refund, tax return, Tax Scams, tax system, Tax Tip, taxation, taxes
Posted in Uncategorized | 6 Comments »
Saturday, May 22nd, 2010
Statement of IRS Commissioner Doug Shulman on the Filing Deadline for Small Charities
Now that the May 17 filing deadline has passed, it appears that many small tax-exempt organizations have not filed the required information return in time. These organizations are vital to communities across the United States, and I understand their concerns about possibly losing their tax-exempt status.
The IRS has conducted an unprecedented outreach effort in the tax-exempt sector on the 2006 law’s new filing requirements, but many of these smaller organizations are just now learning of the May 17 deadline. I want to reassure these small organizations that the IRS will do what it can to help them avoid losing their tax-exempt status.
The IRS will be providing additional guidance in the near future on how it will help these organizations maintain their important tax-exempt status — even if they missed the May 17 deadline. The guidance will offer relief to these small organizations and provide them with the opportunity to keep their critical tax-exempt status intact.
So I urge these organizations to go ahead and file — even though the May 17 deadline has passed.
Filing a tax return for the small organizations is easier than you’d think. It just takes a few minutes to fill out the electronic notice Form 990-N (e-Postcard). This is available for small tax-exempt organizations with annual receipts of $25,000 or less.
Statement of IRS Commissioner Doug Shulman on the Filing Deadline for Small Charities
Now that the May 17 filing deadline has passed, it appears that many small tax-exempt organizations have not filed the required information return in time. These organizations are vital to communities across the United States, and I understand their concerns about possibly losing their tax-exempt status.
The IRS has conducted an unprecedented outreach effort in the tax-exempt sector on the 2006 law’s new filing requirements, but many of these smaller organizations are just now learning of the May 17 deadline. I want to reassure these small organizations that the IRS will do what it can to help them avoid losing their tax-exempt status.
The IRS will be providing additional guidance in the near future on how it will help these organizations maintain their important tax-exempt status — even if they missed the May 17 deadline. The guidance will offer relief to these small organizations and provide them with the opportunity to keep their critical tax-exempt status intact.
So I urge these organizations to go ahead and file — even though the May 17 deadline has passed.
Filing a tax return for the small organizations is easier than you’d think. It just takes a few minutes to fill out the electronic notice Form 990-N (e-Postcard). This is available for small tax-exempt organizations with annual receipts of $25,000 or less.
Tags: Filing a tax return, Filing Deadline for Small Charities, Form 990-N, Form 990-N (e-Postcard), income tax, income tax preparation, income taxes, IRS Commissioner Doug Shulman, May 17 deadline, small tax-exempt organizations, Statement of IRS Commissioner Doug Shulman on the Filing Deadline for Small Charities, Tax, tax exempt status, tax preparation, taxes
Posted in Uncategorized | 1 Comment »
Wednesday, May 12th, 2010
Investment Credit
Generally, the energy credit from the following properties was scheduled to expire after 2008 but has been extended through 2016.
Qualified fuel cell property.
Qualified microturbine property.
Solar energy property.
For tax years beginning after October 3, 2008, the energy credit can offset the alternative minimum tax.
For periods after February 17, 2009, the investment credit includes the qualifying advanced energy project credit.
For periods after 2008, the $4,000 limit on the energy credit for qualified small wind energy is repealed.
You may elect to treat qualified property placed in service as part of a qualified investment credit facility after 2008 as energy property for purposes of the energy credit instead of takingthe renewable electricity production credit.
Investment Credit
Generally, the energy credit from the following properties was scheduled to expire after 2008 but has been extended through 2016.
Qualified fuel cell property.
Qualified microturbine property.
Solar energy property.
For tax years beginning after October 3, 2008, the energy credit can offset the alternative minimum tax.
For periods after February 17, 2009, the investment credit includes the qualifying advanced energy project credit.
For periods after 2008, the $4,000 limit on the energy credit for qualified small wind energy is repealed.
You may elect to treat qualified property placed in service as part of a qualified investment credit facility after 2008 as energy property for purposes of the energy credit instead of taking the renewable electricity production credit.
Tags: advanced energy project credit, alternative minimum tax, business tax, business taxes, credit for qualified small wind energy, energy credit, energy project credit, income tax, income tax preparation, income taxes, Investment Credit, Qualified fuel cell property, Qualified microturbine property, qualified small wind energy, qualifying advanced energy project credit, renewable electricity production credit, small business tax, small wind energy, Solar energy property, Tax, tax preparation, taxes
Posted in Uncategorized | 1 Comment »
Tuesday, May 11th, 2010
Qualified Transportation Fringe Benefits – Bicycle Commuting Reimbursement
2009 Changes
After 2008, qualified transportation fringe benefits include any qualified bicycle commuting reimbursement.
Qualified bicycle commuting reimbursement. For any calendar year, the exclusion for qualified bicycle commuting reimbursement includes any employer reimbursement during the 15-month period beginning with the first day of the calendar year for reasonable expenses incurred by the employee during the calendar year.
Reasonable expenses include the purchase of a bicycle and bicycle improvements, repair, and storage. These are considered reasonable expenses as long as the bicycle is regularly used for travel between the employee’s residence and place of employment.
Exclusion from wages. Generally, the value of transportation benefits that you provide to an employee during 2009 are excluded from the employee’s wages up to the following limits.
For combined commuter highway vehicle transportation and transit passes:
$120 per month for the months of January and February 2009, and
$230 per month for any month beginning after February 2009.
$230 per month for qualified parking.
For a calendar year, $20 multiplied by the number of qualified bicycle commuting months during that year for qualified bicycle commuting reimbursement.
Qualified bicycle commuting month. For any employee, a qualified bicycle commuting month is any month the employee regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and place of employment and does not receive transportation in a commuter highway vehicle, any transit pass, or qualified parking benefits.
Generally, qualified transportation fringe benefits are excluded from an employee’s wages even if you provide them under a compensation reduction agreement. However, qualified bicycle commuting reimbursements do not qualify for this exclusion if made under a compensation reduction agreement.
Qualified Transportation Fringe Benefits – Bicycle Commuting Reimbursement
2009 Changes
After 2008, qualified transportation fringe benefits include any qualified bicycle commuting reimbursement.
Qualified bicycle commuting reimbursement. For any calendar year, the exclusion for qualified bicycle commuting reimbursement includes any employer reimbursement during the 15-month period beginning with the first day of the calendar year for reasonable expenses incurred by the employee during the calendar year.
Reasonable expenses include the purchase of a bicycle and bicycle improvements, repair, and storage. These are considered reasonable expenses as long as the bicycle is regularly used for travel between the employee’s residence and place of employment.
Exclusion from wages. Generally, the value of transportation benefits that you provide to an employee during 2009 are excluded from the employee’s wages up to the following limits.
- For combined commuter highway vehicle transportation and transit passes:
- $120 per month for the months of January and February 2009, and
- $230 per month for any month beginning after February 2009.
- $230 per month for qualified parking.
- For a calendar year, $20 multiplied by the number of qualified bicycle commuting months during that year for qualified bicycle commuting reimbursement.
Qualified bicycle commuting month. For any employee, a qualified bicycle commuting month is any month the employee regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and place of employment and does not receive transportation in a commuter highway vehicle, any transit pass, or qualified parking benefits.
Generally, qualified transportation fringe benefits are excluded from an employee’s wages even if you provide them under a compensation reduction agreement. However, qualified bicycle commuting reimbursements do not qualify for this exclusion if made under a compensation reduction agreement.
Tags: Bicycle Commuting Reimbursement, business tax, business tax preparation, commuter highway vehicle, compensation reduction agreement, employer reimbursement, income tax, income tax preparation, income taxes, qualified bicycle commuting months, qualified bicycle commuting reimbursement, qualified parking benefits, Qualified Transportation Fringe Benefits, Qualified Transportation Fringe Benefits - Bicycle Commuting Reimbursement, small business tax, small business tax preparation, Tax, tax preparation, taxes, transit pass
Posted in Uncategorized | 1 Comment »
Monday, May 10th, 2010
Many Tax-Exempt Organizations Must File Form 990 by May 17 Deadline to Preserve Tax-Exempt Status with IRS
Audio File for Podcast: Don’t Throw Away Your Tax Exempt Status
IR-2010-59, May 7, 2010
WASHINGTON — A crucial filing deadline of May 17 is looming for many tax-exempt organizations that are required by law to file their Form 990 with the Internal Revenue Service or risk having their federal tax-exempt status revoked.
The Pension Protection Act of 2006 mandates that all non-profit organizations, other than churches and church related organizations, must file an information form with the IRS. This requirement has been in effect since the beginning of 2007, which made 2009 the third consecutive year under the new law. Any organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.
Form 990-series information returns are due on the 15th day of the fifth month after an organization’s fiscal year ends. Many organizations use the calendar year as their fiscal year, which makes May 15 the deadline for those tax-exempt organizations. May 15 falls on a Saturday this year so the deadline this year is actually Monday, May 17. Organizations can request an extension of their filing date by filing Form 8868 by the original due date. Absent a request for extension, there is no grace period from filing by the original due date.
Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N (e-Postcard). This asks for a few basic pieces of information. Tax-exempts with annual receipts above $25,000 must file a Form 990 or 990-EZ, depending on their annual receipts. Private foundations file form 990-PF.
Any tax-exempt organization that has not filed the required form in the last three years automatically will lose its tax exempt status effective as of the due date of the annual filing. Under the law, the IRS does not have discretion in this matter.
A list of revoked organizations will be available to the public on IRS.gov.
If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.
Many Tax-Exempt Organizations Must File Form 990 by May 17 Deadline to Preserve Tax-Exempt Status with IRS
Audio File for Podcast: Don’t Throw Away Your Tax Exempt Status
IR-2010-59, May 7, 2010
WASHINGTON — A crucial filing deadline of May 17 is looming for many tax-exempt organizations that are required by law to file their Form 990 with the Internal Revenue Service or risk having their federal tax-exempt status revoked.
The Pension Protection Act of 2006 mandates that all non-profit organizations, other than churches and church related organizations, must file an information form with the IRS. This requirement has been in effect since the beginning of 2007, which made 2009 the third consecutive year under the new law. Any organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.
Form 990-series information returns are due on the 15th day of the fifth month after an organization’s fiscal year ends. Many organizations use the calendar year as their fiscal year, which makes May 15 the deadline for those tax-exempt organizations. May 15 falls on a Saturday this year so the deadline this year is actually Monday, May 17. Organizations can request an extension of their filing date by filing Form 8868 by the original due date. Absent a request for extension, there is no grace period from filing by the original due date.
Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N (e-Postcard). This asks for a few basic pieces of information. Tax-exempts with annual receipts above $25,000 must file a Form 990 or 990-EZ, depending on their annual receipts. Private foundations file form 990-PF.
Any tax-exempt organization that has not filed the required form in the last three years automatically will lose its tax exempt status effective as of the due date of the annual filing. Under the law, the IRS does not have discretion in this matter.
A list of revoked organizations will be available to the public on IRS.gov.
If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.
Tags: 990-EZ, business tax, business tax return preparation, electronic notice Form 990-N, federal tax exempt status, Form 8868, form 990, Form 990 or 990-EZ, Form 990-N, form 990-PF, Form 990-series, Form 990-series information, Form 990-series information returns, income tax, income tax preparation, income taxes, irs gov, Many Tax-Exempt Organizations Must File Form 990 by May 17 Deadline to Preserve Tax-Exempt Status with IRS, non-profit organizations, Pension Protection Act of 2006, small business tax, small business tax preparation, small tax-exempt organizations, Tax, tax exempt, tax exempt organizations, tax exempt status, tax preparation, taxes, The Pension Protection Act of 2006
Posted in Uncategorized | 1 Comment »
Monday, May 3rd, 2010
Small Business Health Care Tax Credit
The Small Business Health Care Tax Credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees.
Eligibility Rules
Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
Average annual wage. A qualifying employer must pay average annual wages below $50,000.
Both taxable (for profit) and tax-exempt firms qualify.
Amount of Credit
Maximum Amount. The credit is worth up to 35 percent of a small business’ premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Small Business Health Care Tax Credit
The Small Business Health Care Tax Credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees.
Eligibility Rules
- Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
- Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
- Average annual wage. A qualifying employer must pay average annual wages below $50,000.
- Both taxable (for profit) and tax-exempt firms qualify.
Amount of Credit
- Maximum Amount. The credit is worth up to 35 percent of a small business’ premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
- Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Tags: business tax, business tax preparation, health care coverage, income tax, income tax preparation, income taxes, Small Business Health Care Tax Credit, small business tax, small business tax planning, small business tax preparation, small tax-exempt organizations, Tax, tax preparation, taxes
Posted in Uncategorized | 2 Comments »
Thursday, April 29th, 2010
Tax-Free Employer-Provided Health Coverage Now Available for Children under Age 27
IR-2010-53, April 27, 2010
WASHINGTON — As a result of changes made by the recently enacted Affordable Care Act, health coverage provided for an employee’s children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010.
The Internal Revenue Service announced today that these changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit.
IRS Notice 2010-38 explains these changes and provides further guidance to employers, employees, health insurers and other interested taxpayers.
“These changes give employers a unique opportunity to offer a worthwhile benefit to their employees,” IRS Commissioner Doug Shulman said. “We want to make it as easy as possible for employers to quickly implement this change and extend health coverage on a tax-favored basis to older children of their employees.”
This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.
Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. This new age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.
The notice says that employers with cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate this change.
In addition to changing the tax rules as described above, the Affordable Care Act also requires plans that provide dependent coverage of children to continue to make the coverage available for an adult child until the child turns age 26. The extended coverage must be provided not later than plan years beginning on or after Sept. 23, 2010. The favorable tax treatment described in the notice applies to that extended coverage.
Tax-Free Employer-Provided Health Coverage Now Available for Children under Age 27
IR-2010-53, April 27, 2010
WASHINGTON — As a result of changes made by the recently enacted Affordable Care Act, health coverage provided for an employee’s children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010.
The Internal Revenue Service announced today that these changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit.
IRS Notice 2010-38 explains these changes and provides further guidance to employers, employees, health insurers and other interested taxpayers.
“These changes give employers a unique opportunity to offer a worthwhile benefit to their employees,” IRS Commissioner Doug Shulman said. “We want to make it as easy as possible for employers to quickly implement this change and extend health coverage on a tax-favored basis to older children of their employees.”
This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.
Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. This new age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.
The notice says that employers with cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate this change.
In addition to changing the tax rules as described above, the Affordable Care Act also requires plans that provide dependent coverage of children to continue to make the coverage available for an adult child until the child turns age 26. The extended coverage must be provided not later than plan years beginning on or after Sept. 23, 2010. The favorable tax treatment described in the notice applies to that extended coverage.
Tags: Affordable Care Act, business taxes, cafeteria plans, dependent coverage, Employer-Provided Health Coverage, expanded health care tax benefit, federal income tax return, health insurers, income tax, income tax preparation, income taxes, internal revenue service, IRS Commissioner Doug Shulman, pre-tax contributions, pre-tax salary reduction contributions, self-employed health insurance, self-employed health insurance deduction, small business taxes, Tax, tax preparation, tax-favored basis, tax-free benefit options, Tax-Free Employer-Provided Health Coverage Now Available for Children under Age 27, taxable benefits, taxes, workplace and retiree health plans
Posted in Uncategorized | 4 Comments »
Wednesday, April 28th, 2010
COBRA Health Insurance Continuation Premium Subsidy
The Recovery Act established an employer-provided health insurance continuation subsidy for workers who involuntarily lost their jobs between Sept. 1, 2008, and March 31, 2010. This subsidy has now been extended through May 31, 2010.
Employers and employees: See below for details.
The U.S. Department of Labor website also contains extensive information on this subsidy.
What about the health coverage tax credit? Some people who are eligible for the COBRA subsidy also qualify for the health coverage tax credit (HCTC) and may want to choose this more generous benefit instead. The HCTC pays 80 percent of health insurance premiums for those who qualify. Eligible individuals must receive Trade Adjustment Assistance benefits or be between the ages of 55 and 65 and receive pension payments from the Pension Benefit Guaranty Corporation. Individuals must also be enrolled in a qualified health plan. See more at HCTC: Eligibility Requirements and How to Receive the HCTC.
Employers
See these resources:
IR-2009-15, IRS Releases Information to Help Employers Claim COBRA Medical Coverage Credit on Payroll Tax Form.
Questions and answers on how to administer the COBRA continuation premium subsidy to former employees.
Notice 2009-27, Premium Assistance for COBRA Benefits.
Employers should use the updated:
Form 941, Employer’s Quarterly Federal Tax Return, to report their COBRA premium assistance payments.
Form 941 Instructions, which explain how to complete lines 12a and 12b, which address the COBRA premium assistance payments.
Small employers that file Form 944, Employer’s ANNUAL Federal Tax Return — generally those with an estimated employment tax liability of $1,000 or less in the calendar year — may claim their COBRA credit on Form 944. Additionally, agricultural employers may claim the COBRA credit on Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees.
Employees and Former Employees
The Recovery Act provides eligible workers who have lost their jobs with a 65 percent subsidy for COBRA continuation premiums for themselves and their families for up to 15 months.
Eligible workers pay 35 percent of the premium to their former employers.
To qualify you must have been involuntarily separated from your job between Sept. 1, 2008, and May 31, 2010.
This subsidy is reduced if your filing status is single and your modified adjusted gross income exceeds $125,000 ($250,000 if you file a joint return). If your modified adjusted gross income exceeds $145,000 ($290,000 for joint filers), you do not qualify for the subsidy.
In addition, the COBRA subsidy is available to people who become eligible for COBRA coverage as a result of a reduction in hours occurring between Sept. 1, 2008, and May 31, 2010, followed by an involuntary termination between March 2, 2010 and May 31, 2010. If you fall into this category, your subsidy is available starting with the first period of coverage beginning after the involuntary termination. Individuals who did not take COBRA coverage after the reduction in hours or who signed up but later dropped it, get another chance to sign up for COBRA coverage. In this case, the COBRA coverage would begin with the first period of coverage after the involuntary termination and continue up to 18 months after the reduction in hours. The administrator of a group health plan or other entity must provide notice of the new election right after the involuntary termination. As in the case of other assistance-eligible individuals, the subsidy ends after the earliest of 15 months, the end of COBRA coverage, or eligibility for other group health or Medicare coverage.
COBRA Health Insurance Continuation Premium Subsidy
The Recovery Act established an employer-provided health insurance continuation subsidy for workers who involuntarily lost their jobs between Sept. 1, 2008, and March 31, 2010. This subsidy has now been extended through May 31, 2010.
Employers and employees: See below for details.
The U.S. Department of Labor website also contains extensive information on this subsidy.
What about the health coverage tax credit? Some people who are eligible for the COBRA subsidy also qualify for the health coverage tax credit (HCTC) and may want to choose this more generous benefit instead. The HCTC pays 80 percent of health insurance premiums for those who qualify. Eligible individuals must receive Trade Adjustment Assistance benefits or be between the ages of 55 and 65 and receive pension payments from the Pension Benefit Guaranty Corporation. Individuals must also be enrolled in a qualified health plan. See more at HCTC: Eligibility Requirements and How to Receive the HCTC.
Employers
See these resources:
- IR-2009-15, IRS Releases Information to Help Employers Claim COBRA Medical Coverage Credit on Payroll Tax Form.
- Questions and answers on how to administer the COBRA continuation premium subsidy to former employees.
- Notice 2009-27, Premium Assistance for COBRA Benefits.
Employers should use the updated:
- Form 941, Employer’s Quarterly Federal Tax Return, to report their COBRA premium assistance payments.
- Form 941 Instructions, which explain how to complete lines 12a and 12b, which address the COBRA premium assistance payments.
Small employers that file Form 944, Employer’s ANNUAL Federal Tax Return — generally those with an estimated employment tax liability of $1,000 or less in the calendar year — may claim their COBRA credit on Form 944. Additionally, agricultural employers may claim the COBRA credit on Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees.
Employees and Former Employees
The Recovery Act provides eligible workers who have lost their jobs with a 65 percent subsidy for COBRA continuation premiums for themselves and their families for up to 15 months.
Eligible workers pay 35 percent of the premium to their former employers.
To qualify you must have been involuntarily separated from your job between Sept. 1, 2008, and May 31, 2010.
This subsidy is reduced if your filing status is single and your modified adjusted gross income exceeds $125,000 ($250,000 if you file a joint return). If your modified adjusted gross income exceeds $145,000 ($290,000 for joint filers), you do not qualify for the subsidy.
In addition, the COBRA subsidy is available to people who become eligible for COBRA coverage as a result of a reduction in hours occurring between Sept. 1, 2008, and May 31, 2010, followed by an involuntary termination between March 2, 2010 and May 31, 2010. If you fall into this category, your subsidy is available starting with the first period of coverage beginning after the involuntary termination. Individuals who did not take COBRA coverage after the reduction in hours or who signed up but later dropped it, get another chance to sign up for COBRA coverage. In this case, the COBRA coverage would begin with the first period of coverage after the involuntary termination and continue up to 18 months after the reduction in hours. The administrator of a group health plan or other entity must provide notice of the new election right after the involuntary termination. As in the case of other assistance-eligible individuals, the subsidy ends after the earliest of 15 months, the end of COBRA coverage, or eligibility for other group health or Medicare coverage.
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