Category Archives: IRS

Education, IRS, Tips

Small Business Health Insurance Credit ONLY Available to “SHOP” Participants

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(Inspiration for this post: I just met my FOURTH health insurance agent that did not enroll their small business employer client in a SHOP Marketplace plan. And this client is a not-for-profit that was counting on the credit.  It’s thus far been one of my major sources of stress this tax season.)

PUBLIC SERVICE ANNOUNCEMENT — The small business health insurance credit is ONLY available in 2014 & 2015 IF the small business buys employee health insurance through SHOP. Please check with your agent for 2015 to avoid any unpleasant surprises.

See if you qualify to purchase insurance through SHOP, here:
https://www.healthcare.gov/small-businesses/provide-shop-coverage/qualify-for-shop-marketplace/

We’re talking about a 35-50% credit for what you paid for employee health insurance. Insurance agents are often not doing this on behalf of clients; be proactive. And please spread the word to your small-business-owner friends:  https://www.healthcare.gov/small-businesses/provide-shop-coverage/shop-marketplace-overview/ .

Also — The U.S. Small Business Administration has numerous articles and webinars on the Affordable Care Act for small business owners.  A great resource for non-tax-professionals.  More SBA resources and a link to an archived audio recording on the topic, here: https://www.sba.gov/content/affordable-care-act-training-materials .

It breaks my heart when I have to tell small business owners that they don’t qualify; then they put me in touch with their agent, who acts defensively and tells me to stop telling them how to do their job, instead of a being a partner to their client.  All I’m saying is I’ve seen it too many times and I’m not arguing with any more brokers.  I’m just sending them to this post.

For the record, I understand that there are other reasons than a tax credit to choose a particular health insurance plan, and that’s fine — if the client is informed that they will not qualify for the credit, and chooses to get a non-SHOP plan for other reasons, that’s fine by me.  But they need to know what they’re giving up to do it.

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IRS Spares Small Employers Big ACA Penalties For 2014

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In Last Minute Move, IRS Spares Small Employers Big Affordable Care Act Penalties For 2014.

This article is almost a month old, but it’s still the best one I’ve seen out there on the “critical takeaways” from IRS Notice 2015-17, and the relief it’s bringing to small employers.  It also explains a few confusing bits about why these penalties are of concern in the first place: for example, how old “health insurance reimbursement plans” are not compliant with ACA rules, and how it’s taken a while for the IRS and DOL to get on the same page about it.  It also confirms that S-Corp >2% single-shareholder health insurance is going to be treated the same as it always has — for the time being — but not if there’s more than one person (2% shareholder or not) on the policy.  Considering that the prior ACA guidance in these areas common to small businesses was either vague or conflicting (or both), this is welcome relief, indeed.

 

Education, IRS, Tips

S-Corp Accountable Plans

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UPDATE 2/25/17 — please don’t confuse partnerships with S-Corps.  The home office deduction for partnerships is completely different than what I’ve outlined below.  There’s a fabulous blog post about partnership home office deductions here, by an excellent CPA firm in Oregon.

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As you may know, many small businesses take a “home office deduction” on their personal return.  But that doesn’t include S-Corp shareholders.  Those business owners cannot take the home office deduction because they are considered employees of the business, as well as owners, and as such, they would be restricted under the same “2% of AGI” floor that regular employees are when they try to deduct unreimbursed employee expenses.

They also aren’t allowed to charge themselves rent — or if they do, they can’t deduct expenses against it, making that arrangement costly.

However, they can get reimbursed by the S-Corp for their out-of-pocket expenses.  It’s called an “Accountable Plan”, and it’s really quite simple.  Just keep decent records — which you’d have to do if you were claiming the home office deduction anyway.  Substantiate the portion of the space used by your business, divide it by the total square footage, and there you have your business-use-percentage.  Now multiply that by the expenses related to running an office out of your home — keeping in mind that you have to follow the same rules as sole proprietors: the space has to be used BOTH regularly and exclusively for business.  I have a couple of clients who wrote up an accountable plan (stating that the company would reimburse the shareholder-employee for these substantiated home office expenses) and attached a floor plan of the office space as further support for which portion is personal and which is business-use.  Nice touch.

I was really impressed by this lovely article that a CPA firm out in Colorado wrote on the topic, and they link to a “sample accountable plan reimbursement form” that’s quite nice (they even update it annually).  If you’re looking for a CPA in that area, I must say I was pretty impressed with their resources, offerings and pricing.

Pull Money Out of the S-Corp, Accountable Plan – Watson CPA Group- Tax KnowledgeBase and FAQs.

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IRS Announces Start Date To 2014 Business Tax Season

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After announcing recently that the individual return filing season would begin January 31, the IRS followed it up with a statement that business returns (non-Schedule C or E) will begin being accepted January 13.

(However, I usually recommend waiting a week after filing season opens to file returns, just to make sure any bugs have been worked out on the first line of fire.)

Corporate returns are generally due on March 15, but since that falls on a Saturday this year, the due date for forms 1120, 1120S and 1120-C will be March 17, 2014.  Partnership returns are due April 15, as usual.

IRS Announces Start Date To 2014 Business Tax Season.

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Tax Season Opens January 20th

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The IRS just announced that even with the Extenders legislation passing so last-minute, they’ll be able to open the season on-time, as planned, on January 20th.

This means that if you file a paper return before then, it will get held until the 20th, and if you attempt to e-file before then, it will either be held or rejected.

Of course, this won’t affect most of you reading my post, as small business clients usually have to wait until at least February, to make sure they have received all of their info: W-2, 1099 and 1098 forms are not required to be mailed to recipients until January 31st.

Personally, I hold off on e-filing any client returns until February 1st anyway, except in very unusual circumstances, since there are often bugs in the IRS processing software and tax preparation software, and waiting a week or two for these issues to be discovered and resolved is a good practice.

Here’s the IRS announcement: Tax Season Opens As Planned Following Extenders Legislation.

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Volunteering & Charitable Contributions — what’s deductible, and how?

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I was chatting with wonderful old friend tonight and helping her with some year-end tax advice, when I found out that she had some misconceptions and missing knowledge about how charitable contributions and volunteer deductions work.  I realized she might not be the only one, so here I find myself inspired to spread the word during this time of holiday cheer and giving.

Volunteering — did you know you can deduct 14-cents-per-mile when driving on behalf of a charitable organization during your volunteer work?  For example, if you pick up meals from a soup kitchen and deliver them to folks around your city, you can deduct that mileage as a charitable contribution.  Or if you drive to visit an elderly person for a regular visit as part of a non-profit Eldercare program.  Or if you drive to pick up organic plant seedlings to be sold by a non-profit community garden or a group like Slow Food.  The list goes on!  Just make sure to log the date, location, number of miles, and purpose (same info as for business mile tracking for the standard mileage deduction).

Non-Cash Charitable Contributions — my friend got the wrong idea from her accountant that it’s somehow difficult or inadvisable to deduct $250 or more when giving away old clothing, household items, or other Goodwill/ Salvation Army/ Brown Elephant-type stuff.  Not true!  All it means is that you have to fill out an extra form on your tax return that lists the following: what types of items were donated; the fair market value (how much would the usual consumer buy it for at a thrift store); the date of contribution; the name & address of the donee.  Thing is, you should be keeping this information anyway, even if the donation was under $250.  Only difference is that the IRS requires it to be noted on the tax return for $250 or above.

People often underestimate the value of these used items.  I just use a spreadsheet with columns: ITEM; VALUE; QUANTITY; TOTAL (quantity times value).  Then I add up the TOTAL column.  Easy peasy.  However, I’ve also worked with clients who use the tool “It’s Deductible”, by Intuit which has a free version they use to try to entice you into buying their Turbo Tax product.  But it’s a good tool, worth trying —  https://turbotax.intuit.com/personal-taxes/itsdeductible

Charitable Contributions via cash, check or credit card — Lastly, here’s a nice little list of tips from the IRS on deducting Charitable Contributions.  It’s such a great way to lower your tax bill, and give back to the causes that move you, or to “invest” in your own community.  Don’t forget to check out your charities on http://www.charitynavigator.org to make sure they’re using your dollars efficiently.  Happy Giving!

Eight Tips for Deducting Charitable Contributions.

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Congress Slashes IRS Budget Another 3 Percent

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Because the IRS wasn’t underfunded and overburdened enough.  I personally find it unfair that Congress keeps increasing the IRS’s responsibilities, forcing them to oversee programs that were never part of the deal in the past, but decreases their budget every year.  Who suffers?  Accountants and taxpayers dealing with overworked and undertrained IRS staffers.

Congress Slashes IRS Budget Another 3 Percent.

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House Passes $42 Billion Plan to Revive U.S. Tax Breaks for 2014

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The House finally passed the 2014 extenders, and we’ll see what happens in the Senate.

House Passes $42 Billion Plan to Revive U.S. Tax Breaks for 2014.

(I don’t think this should be a Democrat or Republican issue — it’s obvious to all of us in taxation that if you only ever extend tax breaks retroactively, they are extremely ineffective at generating the additional economic benefit for which they were originally intended.  Plus, it makes tax planning a major and unnecessary headache!)