5 Life Events That Qualify You for Special Enrollment

If you are uninsured and you missed the open enrollment period for 2015, you may still obtain insurance through the Marketplace or your current employer if the following five life events are applicable to you.

1 – Having a Baby – Having a newborn allows you the opportunity for you to sign up your family for health insurance to ensure all family members have coverage.

2 – Getting Married – When your marital status has officially changed, you are allowed to make a change in your health care coverage for both you and your new spouse.

3 – Moving to New Residence – Moving to a new state means both a new home and a new option for health insurance.

4 – Losing Other Heath Insurance – If you lost coverage due to an employer dropping coverage, you got laid off, you left your job or you turned 26 and were consequently dropped from parent’s coverage, you can enroll in health care insurance.

5 – Obtaining Citizenship – If you recently gained citizenship, you now have the right to gain health coverage.

It is very important to note that you usually have sixty days from the time of one of the above life events to enroll or make changes to your existing coverage.

1099 Filings

As we near the end of the year,do not forget the IRS filing requirements for 1099’s. As you may be aware,  the IRS a few years ago added a question to all business tax returns which specifically asked if payments were made that would require filing Form 1099.

We want to remind you of your potential filing obligation of Form(s) 1099. You will be required to file Form 1099 if any of these apply (not all inclusive):

  1. Payments totaling $600 or more made to anyone providing a service who is not incorporated. For example, did you hire a lawn mowing company?
  2. Are you an individual who owns rental properties?  Did you hire any contractors and pay them $600 or more during the year?  For example, did you replace old carpet and hire a contractor to install the new carpet?
  3. Make Rent payments of $600 or more. For example, do you make a payment to rent office space or warehouse space for your business?

The first deadline for the 2014 Form 1099 reporting is January 31, 2015. There are various penalty assessments if you file late and even more significant penalties for non-compliance. If you feel you may have a filing requirement, you should request a completed Form W-9 from the contractor, attorney, or other payment recipient.

Although a few months away, the data you need for these forms has already been recorded.  Don’t let this filing requirement get past you.

Inherited IRA’s and bankruptcy

A unanimous Supreme Court has held that inherited IRAs do not qualify for a bankruptcy exemption, i.e., they are not protected from creditors in bankruptcy. Under the Bankruptcy Code, a debtor may exempt amounts that are both (1) “retirement funds,” and (2) exempt from income tax under one of several Internal Revenue Code provisions, including the one that provides a tax exemption for IRAs. Resolving a conflict between the Circuit Courts of Appeal, the Supreme Court has held that this exemption does not extend to inherited IRAs because funds held in them are not retirement funds. For this purpose, the term “inherited IRA” doesn’t include amounts inherited by the spouse of the decedent. This decision should be taken into account when selecting IRA beneficiaries. If a potential beneficiary is under financial distress, the IRA owner should consider naming a trust as beneficiary instead. The individual could be named as beneficiary of the trust without jeopardizing the full IRA funds if he or she personally goes bankrupt.

Foreign Taxpayers

U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2013, may have a U.S. tax liability and a filing requirement in 2014.

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.

Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds. Please call us for details.

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2013 must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

This form replaces TD F 90-22.1, the FBAR form used in the past. It is due to the Treasury Department by June 30, 2014, must be filed electronically and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, please contact us.

If you are a U.S. taxpayer living here or abroad and have questions about your U.S. tax obligations, please don’t hesitate to call us.

Home Office Deduction Safe-Harbor

Individual taxpayers who elect this method can determine the deduction by multiplying the allowable square footage by $5. The allowable square footage is the portion of the dwelling used in a qualified business use, up to 300 square feet; thus, the maximum safe-harbor deduction is $1,500. The safe harbor is elected on a timely filed original tax return (instead of on Form 8829, Expenses for Business Use of Your Home, which is used for the actual-expense method), and taxpayers are allowed to change their treatment from year to year. However, the election made for any tax year is irrevocable.

No depreciation is allowed for the years in which the safe harbor is elected, but it is permitted in years in which the actual-expense method is used. The revenue procedure gives detailed examples of how depreciation is calculated in a year after the safe-harbor method is used.

To use the safe-harbor method, taxpayers must continue to satisfy all the other requirements for a home office deduction, including that the space be used exclusively for the qualified business purpose and that an employee qualifies for the deduction only if the office is for the convenience of the taxpayer’s employer.

Sec. 179 Set to Expire

The upfront tax deduction for equipment placed into service during 2013 is set to drastically reduce on 12/31/13.  Unless the tax law is changed…which usually happens when popular tax deductions are set to expire – the deduction next year will cap out at $25,000.  Translation…you buy an $85,000 piece of equipment in 2013, we can deduct the entire amount if needed, with a few restrictions.  Next year, with no extension by a law change, such piece will generally have an upfront deduction of only $25,000 with the remainder over basically 5 years..  In a  nutshell….get your large equipment purchases completed by 12/31/13.   

Bonus Depreciation

The tax law allowing 50% bonus depreciation is set to expire after 2013.   Companies using this break can write off one-half of the cost of new assets with useful lives of 20 years or less.  In certain situations, leasehold improvements also qualify, which could be a large break.  With all the gridlock in Congress, this break may not be revived for 2014, so if you can, put assets into service by December 31, 2013.

Succession Planning

It usually takes a minimum of two years to transition clients from one partner to the next or to a new owner.  There are numerous factors that effect the time frame and potential sales price of a professional services firm for example…are clients loyal to the brand or to the partner, are long term leases involved in the purchase, how active is the retiring partner etc.  If you are near this stage in your career, call our office and do your best to not leave any money on the table.  You cannot plan to early for this.

Identity Theft, Fraud and Taxes

Please note that you can file Form 14039 with IRS to put them on notice that your identity may have been compromised. The Director of the IRS Office of Privacy, Governmental Liaison and Disclosure, stated that: “We have a special account marker that we use. . .where an individual has had their personal information stolen or compromised. Maybe they do not have a tax problem yet, but we encourage, in that situation, for [him or her] to call. We put that special marker on your account, and it lets us know that that account is at risk.”


IRS Penalties

The IRS has a program called “first time abate” which will enable taxpayers who have received a penalty notice for failure to file, pay or deposit to have the penalty removed IF and this is non-negotiable, there has been no prior late filings or payments in the past.  This removal is a one-time consideration….but it is automatic.  Call our office if you have any questions.