From time to time, we post news or information on this website that we feel may be of interest to our existing and prospective clients. These articles are meant to raise awareness of topics we feel may be of interest to individuals and small business people. They are not meant to be fully inclusive reference materials. The topics we address may be complex and the results of their application specific to your situation, so this information is not a substitute for professional tax, payroll, or accounting advice and your reading or use of it is not intended to and does not create a client relationship with our firm or its CPAs. Laws and regulations governing these topics can change rapidly, so information contained in these postings may become outdated. If you have further questions, give us a call so that we can arrange a meeting to discuss your unique circumstance.
The 21st Century Cures Act was signed into law December 13, 2016. The new law allows small employers to reimburse employees for individual health insurance policies, even if purchased on the health care exchange. The reimbursement is limited in dollar amount and also has non-discrimination / uniformity rules. The new law also specifies how the reimbursement reduces or potentially eliminates the employees’ premium tax credit. If you believe that this rule may be beneficial for you, give one of our CPAs a call to discuss how it may fit your business.
Late in the day on November 22, a federal court in Texas issued a nationwide injunction stopping the implementation of the new overtime rules which were set to go into effect December 1, 2016. The new rule was set to increase the pay of certain salaried employees. The ruling calls into question whether the new overtime regulations will ever be implemented, given the coming change of administration in the White House.
As year-end approaches, you should be aware that the due dates of some types of tax returns have changed. Beginning in the upcoming 2017 filing season (for tax years ending December 31, 2016), the due date of partnership tax returns has been moved up to March 15 from April 15. C-corporations with calendar year ends will now be due April 15 as opposed to March 15. S-Corporation tax returns continue to be due on March 15. The FinCEN Form 114, which is a report of foreign financial holdings, will now be due April 15 instead of June 30. These changes were included in the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, and are meant to provide a more logical filing order because the K-1 Form from partnership and s-corporation tax returns are needed in order to file personal taxes.
The income tax reciprocity agreement between Pennsylvania and New Jersey is ending effective January 1, 2017. This change impacts employers who may have NJ residents working in a PA place of employment or visa-versa. For example, a business located in Pennsylvania with employees who reside in New Jersey will now withhold PA taxes on those employees. In turn, the employees who live in one state and work in the other will have to file two state income tax returns, getting a credit (or partial credit) on their resident state return for taxes paid to the state in which they worked. New Jersey chose to end the agreement to help fill a budget shortfall.
The Affordable Care Act instituted a wide variety of requirements pertaining to health insurance. Two central parts of the law are the “individual mandate” for each person to maintain health insurance coverage and the requirement that large employers offer health insurance to employees or pay a penalty. In order to gather the information necessary to enforce these rules, the IRS has implemented the 1095 series of forms. 1095-A forms are issued by health insurance exchanges and provide individuals and the IRS proof of coverage. 1095-B forms are issued by health insurance companies and provide individuals and the IRS proof of health insurance coverage by month. The third in the series is the 1095-C form. This form serves two purposes. The 1095-C is a report from an employer documenting to the IRS and employee whether affordable health insurance was offered in accordance with the law. In addition, for self-insured employers it provides the documentation of coverage for employees and their dependents. This year, as more employers choose to go the self-insured route due to the cost benefit, some employers do not realize that self-insured health plans may need to issue 1095 forms to employees even if the employer is not an “applicable large employer.” If you are self-insured, you will also need to address other fees and filings such as the “transitional reinsurance fee” and “PCOR” fees which are paid through an excise tax return. If you started a self-insurance plan in 2016, give David or Daniel Siegel a call to discuss what records you need to gather and how we can help you meet your health insurance reporting obligations.
As many of our clients have begun to evaluate how to handle another year of health insurance cost increases, some smaller employers have erroneously come to the conclusion that it would be best to drop their business’s employer coverage and reimburse some amount of an employee’s individual health insurance coverage. While this strategy may sound like a simple plan to contain health insurance costs, it has numerous pitfalls. The IRS and Department of Labor have issued numerous joint regulations (including IRS Notice 2015-17) indicating that such a reimbursement plan is an employer health care arrangement subject to the market reform provisions of the Affordable Care Act. As such, a reimbursement as described above is not allowed to be integrated with an individual health insurance policy in order to meet the ACA market reform provision that there be no dollar limit on health benefits. Such arrangements could subject you to penalties of up to $100 per day per employee. Alternatively, payments made to employees regardless of whether they purchase individual policies must be included in wages, and thus the tax-free status normally afforded to health benefits is lost. Should you be looking for ACA compliant ways to contain your health care costs by having employees share in health insurance premiums while maintaining the benefit’s tax free nature, give one of our Certified Public Accountants a call.
When tangible personal property is purchased a taxpayer must determine whether the cost is an expenditure which will be immediately expensed or if the expenditure must be capitalized. There is a concept of De Minimis expenditures, which represent a limit below which the amount is too small to capitalize and, therefore, the expenditure is expensed, even if its benefit extends longer than a one year period. Prior to the updated regulation 1.263(a)-1(f), single transaction expenditures less than $500 qualified for the De Minimus safe harbor. Under the updated regulations, a business may, before a tax year begins, designate a policy whereby purchases substantiated by individual invoices of up to $2,500 may qualify for the safe harbor and need not be capitalized. Taking advantage of the increased De Minimus safe harbor guidance is likely to be beneficial to businesses which exhaust the expensing limits under section 179. Give us a call to discuss how you can take advantage in these new regulations.
***THESE REGULATIONS ARE BEING LITIGATED. UPDATED INFORMATION AVAILABLE. SEE NOVEMBER 23, 2016 POST *** Early this summer, the Obama Administration finalized new regulations regarding overtime pay. The new regulations, which are scheduled to take effect December 1, 2016, increase the minimum amount that a salaried employee must be paid in order to not be subject to overtime rules. The new floor is $47,476 increased from $23,660. The new regulations also increase the earnings floor determining whether a high earning “white collar employee” may be exempt from overtime rules. If you are a client or prospective client, please feel free to contact us to obtain a more detailed summary of the changes. ***
Effective August 1, 2016 digitally or electronically delivered video, photographs, books, and other printed material, apps, games, music, and even canned software are taxable for Pennsylvania Sales Tax, whether purchased in a single transaction or by subscription. We expect this to affect service businesses which may sell subscription software, and we also expect this to affect businesses which consume professional subscriptions from out of state vendors who are not required to collect sales tax. In this case, the consumer of the subscription will be responsible for use tax.
The 2015 year brings with it the implementation of additinal reporting requirements under the Affordable Care Act for certain employers. In addition, arrangements that some employers have used for decades to help employees obtain health care tax free are no longer allowed. If you have questions about what the Affordable Car Act means for the taxes of your business and its employees, we suggest you set up a meeting with a CPA from our firm to help you better understand the tax effects of your options as well as new obligations that you may now have.
Stanilla Siegel and Maser LLC
825 Norman Drive
Lebanon, PA 17042
Fax: (717) 273-3576