What you need to know for 2010 – Dissecting the Healthcare Bill – Part 1 of 4 | Tax Tip of the Week | No. 46 June 23, 2010
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We are going to start a four-part series of Tax Tips to take a look at the Patient Protection and Affordable Care Act and the Health Care & Education Affordability Act. These acts represent over 2400 pages of new laws and are collectively called the Healthcare Bill.
Despite widespread belief that health coverage is mandatory now, the mandate for health insurance coverage does not actually take effect until 2014. In fact, some provisions of the Healthcare Bill do not take effect until 2018.
This week we will highlight the changes that take effect in 2010. Subsequent Tax Tips will look at future changes.
Here is what you need to know for 2010:
- Health care coverage availability for children up to age 26 (by 9/23/2010)
- Ban on lifetime benefit limits of health care plans
- Ban on exclusion of coverage for pre-existing conditions for those under age 19, (2014 for all)
- Policies must cover preventive checkups without employee co-pays
- Tax credits available to small business owners to offer health care coverage
- 10% sales tax on tanning salon services
- Businesses must provide the same coverage for all employees
- 20% – 40% penalties associated with transactions that do not meet the “Economic Substance” test
- Medicare Part D “donut hole” will be narrowed by providing a $250 rebate to senior citizens
- A new $13,170 refundable Adoption Credit
There are many unknown and unanswered questions about this mammoth and far reaching bill. As Speaker of the House, Nancy Pelosi said, “Let’s pass this bill and see what is in it.”
We’ll find out together.
Questions? In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.
Rick Prewitt – the guy behind TTW
…until next week.
Tax and Asset Protection Considerations in choosing a business entity | Tax Tip of the Week | No. 45 June 16, 2010
Posted by admin in : Tax Tip , add a commentWhen your accountant or attorney wants to discuss entity choice, they are referring to the various types of business entities or structures available. Generally speaking, the relevant options available for most businesses including start-ups are:
1. LLCs (limited liability company)
2. S corporation
3. C corporation
4. Limited partnership
5. General partnership
6. Sole proprietorships
When considering the pros and cons of each type of entity, the many multifaceted issues may be grouped into two broad categories:
A. Taxation
B. Asset protection
Taxation
Taxation issues may vary significantly by entity choice. For example, the sale and liquidation of a C corporation may result in double taxation whereas the sale of an S corporation, LLC, or a partnership may result only in single taxation. Entity differences also exist between the different categories of income – ordinary, capital gain, passive, investment, and self employment income. All of which may be taxed at different rates.
Taxable compensation inside corporations is affected by the number of owners and their involvement in the business. For both C and S corporations, reasonableness of compensation can be a huge issue. For C corporations, the issue can be whether an owner’s salary is too high in comparison to any dividends paid. For S corporations, the issue is whether the salary is too low in relation to distributions paid.
Often, in the early years of a business or in today’s economy, the ability to use losses can be important in the choice of a business structure. Generally speaking, third party debt may create tax basis for owners. In this respect, LLCs, partnerships, and sole proprietorships provide better opportunities for passing through losses to the owners than do S corporations.
Asset Protection
Asset protection will vary by state and type of entity. One should consult with their attorney for the particular details. Remember that the limited liability or asset protection is usually designed to protect the owner’s personal assets and not to protect the entity itself. Thus, the entity may not be the safest place to save money.
Please let us know if you have any questions while walking through this mine field of entity choice. Future laws will affect this process as well. Sometimes, one entity may be later exchanged for another but often in reality you may be locked into your existing structure, thus, making entity choice a very important decision.
In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.
Mark Bradstreet – Author of this week’s TTW
Rick Prewitt – the guy behind TTW
…until next week.
Energy Tax Credit Update | Tax Tip of the Week | No. 44 June 9, 2010
Posted by admin in : Tax Tip , add a commentGo Green and Save Some Green
During the recent 2009 tax filing season, we saw many clients take advantage of the Residential Energy Tax Credit.
As a reminder, this credit is available to homeowners who install energy-efficient:
- Exterior Windows and Skylights
- Storm Windows
- Exterior Doors
- Storm Doors
- Central A/C
- Air Source Heat Pumps
- Natural Gas or Propane Furnaces
- Oil Furnaces
- Gas, Propane or Oil Hot Water tanks
- Electric Heat Pump Water Heater
- Insulation
- Some metal and asphalt Roofs
- Biomass Stoves
The credit is 30% of the cost of the qualified energy-efficient property up to a maximum of $1,500 (example: $5,000 new windows X 30% = $1,500.)
If you did not take the maximum credit in 2009, it is still available to be taken on your 2010 tax return. Note: The $1,500 credit is the maximum you can claim for 2009 and 2010 combined.
In addition, this is one of the few credits that is not limited by AGI—meaning higher income taxpayers can also use this credit.
Take a look at your home this summer and see what improvements need to be made with Uncle Sam’s help!
As always, give us a call before you do something – not after!
In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.
Health Coverage Tax Credit for Small Employers | Tax Tip of the Week | No. 43 June 2, 2010
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One of the provisions of the Patient Protection and Affordable Care Act is a credit designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.
The maximum credit is 35% of premiums paid in 2010 by eligible small business employers. In 2014, this maximum credit increases to 50%.
The credit is specifically targeted to help small businesses that primarily employ low and moderate income workers. It is generally available to employers that have fewer than 25 full-time employees paying wages averaging less than $50,000 per employee per year.
There are also special rules for non-profit organizations to encourage health insurance coverage.
Give us a call if you want to discuss the details of this new act.
In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.
Rick Prewitt – the guy behind TTW
…until next week.
Young adult children get expanded coverage | Tax Tip of the Week | No. 42 May 26, 2010
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Changes made by the recently enacted Patient Protection and Affordable Care Act, provide tax-free health coverage for an employee’s children who are under age 27. The change is effective March 30, 2010. These changes immediately allow employers with cafeteria plans to permit employees to begin making pre-tax contributions to pay for this expanded benefit.
In addition to extending coverage to older children, the act also requires plans that provide dependent coverage to continue to make the coverage available for an adult child until the child reaches age 26. The extended coverage must be provided no later than plan years beginning on or after September 23, 2010. The favorable tax treatment applies to the extended coverage.
IRS Notice 2010-38 explains these changes in greater detail and provides further guidance to employers, employees and health insurers.
As always, feel free to call us anytime to discuss these ever changing laws.
In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.
Rick Prewitt – the guy behind TTW
…until next week.
COBRA Extension | Tax Tip of the Week | No. 41 May 19, 2010
Posted by admin in : Tax Tip , add a commentEmployees who involuntarily lost their jobs had been eligible to continue their employer sponsored health insurance coverage through a subsidized assistance program. This means a displaced employee would only need to pay 35% of their COBRA health benefits, and the employer could take a 65% tax credit on their payroll tax returns. An employee can continue these benefits for up to 15 months.
This plan was set to expire on March 31, 2010. A new law was recently passed that extends this subsidy program to those eligible employees through May 31, 2010.
This is the second extension of the COBRA subsidy program and many Capitol Hill watchers expect the program will ultimately be extended through the end of 2010.
We’ll keep you posted.
Questions? Just give us a call. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.
Rick Prewitt – the guy behind TTW
…until next week.
Hiring Incentives to Restore Employment (HIRE) Act provides Employer Relief – Tax Tip of the Week | No. 40 May 12, 2010
Posted by admin in : Tax Tip , add a commentNew Law Provides Employer Relief
A new law was recently passed called The Hiring Incentives to Restore Employment (HIRE) Act. The HIRE Act is a $17.5 billion dollar plan that is intended to accelerate the hiring of unemployed workers and further stimulate this uncertain economy.
The law provides relief from the employer share of social security tax payments up to $6,621.60 (6.2% of the $106,800 FICA wage cap).
The employer is still obligated to pay the Medicare portion of the payroll taxes, the regular tax withholding payments and the employee share of FICA and Medicare. The “credit” is taken when the employer files their Form 941 payroll tax returns.
Employers are eligible to take this credit for new hires that have been unemployed for at least 60 days. Employment must begin after February 3, 2010 and before January 1. 2011.
In addition, the bill provides a $1,000 credit to the employer if the new hire is employed for at least 52 consecutive weeks. This credit would be taken on the employer’s 2011 income tax return.
As always, careful record keeping must be done to take advantage of these tax incentives. You will definitely want to give us a call if you know of anyone looking to hire new employees.
Questions? Just give us a call. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.
Rick Prewitt – the guy behind TTW
…until next week.
Required Minimum Distribution (RMD) for 2010 – Tax Tip of the Week | May 5, 2010 | No. 39 May 5, 2010
Posted by admin in : Tax Tip , add a commentThe Suspension is over
As you may remember, the requirement to take a Required Minimum Distribution (RMD) was suspended for 2009.
Starting in 2010, anyone over age 70 ½ with an IRA or other qualified retirement plan must receive their RMD each year. There are penalties if the RMD is not taken.
If you, or anyone you know, is over 70 ½, double check with the administrator of your plan that these distributions are scheduled for this year.
You might have some questions on this one… Just give us a call. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.
Rick Prewitt – the guy behind TTW
…until next week.
The Domestic Production Activities Deduction…. An often overlooked deduction – Tax Tip of the Week #38 April 28, 2010
Posted by admin in : Tax Tip , add a commentThe Domestic Production Activities Deduction (DPAD) is a much overlooked deduction by business owners.
This deduction is available to businesses that pay wages (W-2 wages) and meet one of the following requirements:
- Any lease, rental, license, sale, exchange, or other disposition of:
- Qualifying production property which was manufactured, produced, grown, extracted by the taxpayer in whole or in significant part within the United States
- Any qualified film produced by the taxpayer
- Electricity, natural gas, or potable water produced by the taxpayer in the United States
- In the case of taxpayer engaged in the active conduct of a construction trade or business, construction of real property performed in the United Sates by the taxpayer in the ordinary course of such trade of business.
- In the case of taxpayer engaged in the active conduct of an engineering or architectural services trade or business in the United States with respect to the construction of real property.
In 2009, the DPAD is equal to 6% of the smaller of:
- Qualified productions activities income (QPAI)
- Taxable income figured without DPAD for the year
In 2010, the DPAD percentage will increase to 9%.
This could be a very significant deduction for business owners and should not be overlooked.
You might have some questions on this one… Just give us a call. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.
Rick Prewitt – the guy behind TTW
…until next week.
Whew – Tax season wraps – Tax Tip of the Week No. 37 April 21, 2010
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Aaaah……The week after tax season (and the first full weekend home in two and half months) is the best week in a tax accountant’s life!
Even though tax season is over—we will continue our Tax Tip of the Week mailing for the rest of the year. We will keep you updated on the constant changes as well as spotlighting specific tax planning ideas.
If there are any special tax topics you would like us to cover, just send us an email or give us a call.
We enjoyed meeting new clients this year as well as working again with the many clients we have gotten to know over the years. Thanks for being part of the Bradstreet community.
Need help with last minute tax issues? Just give us a call. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.
Rick Prewitt – the guy behind TTW
…until next week.
