Newsletter 2014
Newsletter 2014
2014 Tax Highlights
2014 Tax Highlights
Print Full ArticleLast Reviewed: Jan 2015
Last Modified: Jan 2015
The Affordable Care Act has created quite a stir among tax professionals this season. This is the first year that we must tackle mandatory insurance reporting and there has been a great deal of uncertainty about how this will be done. IRS has allocated significant resources to manage the reporting on their side and at our seminars this fall and winter we have learned the basics about how this reporting will be done. We do not, however, have all the details. IRS has only issued drafts of the forms needed for this reporting as of this writing and for 2014 employers and insurance companies are not required to issue the information forms taxpayers are supposed to receive to complete their reporting. The insurance exchanges will be issuing information Form 1095-A so if you receive one of these please be sure to provide it to us. Our take on this for 2014 is that we will all do the best we can and the reporting will not be perfect, but we will learn from this season and it will get easier and better for future years. Hopefully the IRS sees it this way, too, but you never know with them.
Here are the major elements of The Affordable Care Act that impact taxpayers and our 2014 reporting. With limited exceptions, all of us were required to have health insurance coverage during all of 2014. Taxpayers at the low to middle income levels who purchased insurance through an insurance exchange may be eligible for a credit to help pay for the cost of insurance. This credit may have been paid directly to the insurance company during the year or may be received by the taxpayer after the return is filed. If the credit was paid during the year to the insurance company the credit will be recomputed on the tax return to see if, based upon actual household income, there is an additional credit due or if the taxpayer was overpaid and now needs to return part of the credit as tax on the return.
For taxpayers that are not exempt from coverage (there are a variety of exemptions for hardship, religious objection, etc.) and did not have it there will be a penalty computed and paid with the tax return.
Our sense is that most clients will have full coverage for the year through their employer or private pay and that the insurance reporting will be fairly routine and easy. For those clients that obtained coverage through the exchanges without a credit the reporting will also be fairly routine and easy. For clients without full coverage for all months of the year and for those that obtained a credit through the exchange there will be a great deal of extra work to do. Clients that fall into these last two categories should assemble their tax information early and provide it to us as soon as possible and let us know in advance that you will have these reporting issues. Please note that the insurance mandate, the available credit, and the penalty provisions apply to all the taxpayers and dependents reported on the tax return, so parents should be thinking about insurance coverage for children. This could be problematic for divorced or separated parents who no longer communicate.
Legislation extending some popular tax breaks was enacted in December making them available for 2014 filings, but only for 2014. This means we need to have another extender bill for 2015 and beyond. This creates uncertainty about which tax benefits will be available for 2015.
The 2014 extender bill allows the sales tax deduction for itemizers, the educator above-the-line deduction for class-room expenses and the personal residence exclusion for debt forgiveness income. The $100,000 IRA charitable distribution rules were also reenacted for 2014. 50% bonus depreciation for new business assets was reenacted and the Section 179 limit of $500,000 was also renewed.
Our 2015 mileage rates have been published. They are 57.5 cents per mile for business vehicle use, 23 cents for medical miles and moving and 14 cents per mile for the charitable deduction.
Employer mandated health insurance starts in 2015 for businesses with 100 or more full-time equivalent employees. The threshold is lowered to 50 employees in 2016. There is a credit available to certain employers to help pay the cost of mandated employee coverage. The penalty assessed against individuals for not having insurance coverage will rise in 2015. The basic penalty increases to the greater of $365 per person or 2% of household income.
Health insurance plans that reimburse workers for health insurance premiums they pay themselves now violate certain rules that can result in a $100 per day penalty. These penalties apply to pre- and after-tax plans, so no business should be using this type of health coverage for employees. These rules have also spilled over to impact the many S-Corp clients that use the self-employed health insurance above-the-line deduction. This benefit may no longer be available to firms with two or more individuals being reimbursed for health insurance costs. A request for guidance from IRS on this issue is pending. Reimbursement plans with a single participant are not impacted by these rules.
For our Oregon filers, the special medical expense subtraction will now only be available for filers at least 63 years old. Also, the personal exemption credit and political contribution credit are now phased out for higher incomes.
For our same-sex filers the 2014 rules are the same as we used in 2013. If you are legally married in any state you must file as married in Oregon and on your federal return. If you have a Registered Domestic Partnership you file separate federal returns and a joint Oregon return.
