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Tax Tip of the Week | No. 234 | New Ohio Minimum Wage January 29, 2014

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Tax Tip of the Week | January 29, 2014 | No. 234 | New Ohio Minimum Wage

Increase in Ohio’s Minimum Wage

Effective January 1, 2014, the Ohio minimum wage increased by ten cents, from $7.85/hour to $7.95/hour.  The Ohio minimum wage for tipped employees increased from $3.83/hour to $3.98/hour.

The federal minimum wage remains at $7.25/hour.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW
…until next week.

Tax Tip of the Week | No. 233 | IRS Could Face Blame for Obamacare’s Unexpected Tax Bite January 22, 2014

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Tax Tip of the Week | January 22, 2014 | No. 233 | IRS Could Face Blame for Obamacare’s Unexpected Tax Bite

This will affect 2014 tax returns filed in 2015

Obamacare’s rollout dented the Department of Health and Human Services in just the first month. Up next year: the Internal Revenue Service.

A key piece of the health care law gives Americans making less than 400 percent of the poverty line subsidies to buy insurance. But if buyers don’t alert the insurance exchanges to big life changes throughout the year — like a divorce, promotion or new job for them or a spouse— they could wind up with sticker shock at tax time.

It’s a new responsibility for this group — many of whom are just struggling to sign up.

The IRS, for its part, must make sure consumers don’t get blindsided — or it will face a bunch of angry taxpayers who didn’t realize they would owe Uncle Sam money back, tax experts said.

“If I were the IRS, I would be very concerned that I’m going to be viewed as the villain when people have to pay back money the government gave them for health insurance,” said Chris Condeluci, who was Senate Finance Committee GOP tax counsel during drafting of the Affordable Care Act.

There is time. Potential “repayments” to the government will not come due until 2015, when recipients file next year’s taxes. But the new rule for reporting these life changes begins this January.

But there might be good news: If a recipient’s income was to fall and it wasn’t reported, the recipient could get a nice, fat check because he or she would be owed a larger Obamacare tax credit than was received.

Right now, the IRS does explain the issue on its website, but consumers would have to be looking for the information to find it.

All experts interviewed on the topic worried that most tax credit recipients do not have a clue about the new reporting responsibilities, noting that even policymakers are still trying to grasp how the process works.

In California alone, 38 percent of tax credit recipients are projected to have to pay back more than $850 — if no income changes are reported during the year, according to a recent study.

Most repayments would likely mean smaller tax refunds, rather than a new tax bill. That’s because those most likely to use the credits receive around $3,000 in tax refunds each year, said Ken Jacobs, a University of California Berkeley professor and co-author of that study.

Still, a smaller refund can bring hardship for this population, whose members often rely on the annual tax refund check to help pay basic bills.

Individuals have the option to get their Obamacare credits in advance, or they can wait until the year ends and be reimbursed during tax season for premiums they paid the year before.

Tax preparers expect individuals to choose the so-called “advanced” option since many simply don’t have the cash flow to pay the full premium costs upfront.

The true-up process is known as a type of “reconciliation” — a term with little meaning to the uninsured.

This same population expected to use Obamacare’s tax credits is also more likely than higher income groups to have volatile incomes.

“People in lower-income families may be working one or two jobs, or picking up shifts,” said Lynn Quincy, senior policy analyst for Consumers Union. “If there comes an option to make more money, they’ll take it.”

Her group is trying to educate subsidy recipients about the new regime.

“Consumers struggle with tax concepts to begin with, and these new tax credits for health insurance layers on additional features they haven’t seen before,” she said.

Exchanges can give recipients the choice of taking a partial credit in advance rather than the full amount. They’re also supposed to remind customers that they need to update their information if it changes.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 232 | An Update on the Affordable Care Act January 15, 2014

Posted by bradstreetblogger in : Healthcare, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Taxes , add a comment

Tax Tip of the Week | January 15, 2014 | No. 232 | An Update on the Affordable Care Act

Health and taxes converge, equaling headaches for all

If the website headaches weren’t enough, now there appear to be problems with the health care reform tax credits.

The IRS needs to strengthen systems development controls with the new tax credits, according to a new report from the Treasury Inspector General for Tax Administration (TIGTA).

Beginning in January, eligible taxpayers who purchase health insurance through the Health Insurance Marketplace (an Exchange) may qualify for and request a refundable tax credit through the Premium Tax Credit (PTC) Project. These credits can be used to help pay health insurance premiums. The credit is claimed on the taxpayer’s Federal tax return at the end of each coverage year. Because it is a refundable credit, taxpayers who have little or no income tax liability can still benefit. The PTC can also be paid in advance to a taxpayer’s health insurance provider to help cover the cost of premiums. This credit is referred to as the Advanced Premium Tax Credit.

The IRS’s implementation plan for ACA Exchange provisions includes providing information that will support the Department of Health and Human Services and the Exchanges.

TIGTA found that improvements are needed to systems development controls for:

•    Security
•    Fraud detection and mitigation in accordance with
applicable guidance
•    Configuration and change management
•    Interagency test management process

TIGTA recommended that the IRS develop an action plan for resolving security test issues and that the Internal Revenue Manual be updated to provide specific guidance on how to identify and mitigate potential fraud risks with the design, development, and testing of the new information technology systems that must be implemented to meet ACA requirements.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 232 | 2014 Due Dates January 8, 2014

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Tax Tip of the Week | January 8, 2014 | No. 232 | 2014 Due Dates

Publication 509

The IRS recently updated Publication 509 (http://www.irs.gov/pub/irs-pdf/p509.pdf) which lists all the filing due dates for 2014.

This publication contains three calendars:  a General Tax Calendar, Employer’s Tax Calendar, and an Excise Tax Calendar.

You may want to take a look at this publication and update your calendar with all the due dates that pertain to you.

Don’t be late in 2014!

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 231 | Happy New Year! January 1, 2014

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Tax Tip of the Week | January 1, 2014 | No. 231 | Happy New Year!

And Get Ready For The Tax Filing Season.

Hopefully, you followed some of the suggestions we outlined a couple of years ago in Kick off the New Year… by getting organized! to organize your records. If you did, great! This will make filing your tax returns a lot easier this year. It also means that you and your tax advisor can spend more time on tax and financial planning issues for 2014 vs. looking back to 2013.

If you are new to our Tax Tip of the Week series, or didn’t follow our suggestions last year, now would be a good time to review TTW #21. You might want to make getting organized your 2014 New Year’s Resolution!

This week we will look at some of the more common forms that you should be watching for in the coming weeks and months:

W-2:      Employers should mail these by 1/31/14. If you have moved during the year, make sure former employers are aware of your new address.

W-2G:    Casinos, Lottery Commissions and other gambling entities should mail these by 1/31/14 if you have gambling winnings above a certain threshold.
NOTE:  Some casinos will issue you a W-2G at the time you win a jackpot. Make sure you have saved those throughout the year.

1099-INT:  Banks, Credit Unions, Brokerage firms, etc. will issue these by 1/31/14 to show the amount of interest income you earned on your savings/investments.

1099-DIV:   Brokerage firms, mutual funds, etc. have until 2/14/14 to issue these forms to show the dividend income you earned for the year.

1099-B:       Brokerage firms, mutual funds, etc. have until 2/14/14 to show the proceeds from the sale of stocks and mutual funds. Most brokerage firms have gotten better at showing the cost basis on the sale of these investments. If the statements do not show the basis, then you have some homework to do before filing your tax return.
NOTE:  Most of the larger brokerage firms issue “Consolidated Statements” that have the 1099-INT, 1099-DIV and 1099-B earnings reported on the same report.

K-1s:    If you are a partner in a business or a limited partner in some investments, your income and expenses will be reported to you on a K-1. The tax returns for these entities are not due until 4/15/14 (if they have a calendar-year accounting). Sometimes, you may not receive a K-1 until shortly after the entities’ tax return is filed in April.

If you are a beneficiary of an estate or trust, your share of the income and expenses for the year will also be reported on a K-1.  The timing of when you may receive your K-1 is the same as outlined above.

NOTE:  Many times partnerships, estates and trusts will put their tax returns on extension.  If they do, the due date of the return is not until 9/15/14.  We often see client’s receiving K-1s in the third week of September.

If you receive, or expect to receive, a K-1 it may be best if you place your personal return on extension.  It is a lot easier to extend your return then it is to amend your return after receiving a K-1 late in the year.

So start watching your mailbox and put all of these statements you receive in that new file you created!

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.