Carol McAtee's Blog

The Affordable Care Act (ACA):

From our CPA office in St. Petersburg, FL -The following is an update of The Affordable Care Act (ACA) that we wanted to extend to our readers.  Included in this update is a government website for more information.

The Affordable Care Act (ACA) has led to plenty of
confusion. Here is a recent announcement by the U.S.
Department of Labor as referenced on the Small
Business Administration Blog that might be of interest
to you and your clients.

The ACA requires employers to provide their workers with
a notice about the state health insurance exchanges.
These exchanges will sell insurance to individuals who
don’t get coverage through their employers. The exchanges
are also available to small businesses.

October 1st is the deadline for providing these notices.
Some business owners were concerned about paying a fine
of up to $100 per day under the general non-compliance
penalty provisions.

The U.S. Department of Labor has announced that there
will be no penalty for not issuing the notices. The
official announcement as well as sample employee notices
can be seen at:

http://www.dol.gov/ebsa/faqs/faq-noticeofcoverageoptions.html

In summary, the notice states that there will be no
penalty. But if your company is covered by the Fair
Labor Standards Act (you have one or more employees,
sales of over $500,000, and deal in interstate commerce),
you must provide a written notice to your employees about
the Health Insurance Marketplace by October 1, 2013.
But there is no fine or penalty under the law for
failing to provide the notice.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From our CPA office in St. Petersburg, FL – The IRS has released 2013 inflation adjusted figures for several tax benefits, including the gift tax exclusion and the nanny tax. Listed below are the new limits

1. Annual gift tax exclusion is $14,000 per donee.

2. Nanny tax reporting threshold is $1,800 to any one employee per year.

3. The foreign earned income exclusion increases to $97,600.

4. Kiddie tax – the amount used to reduce the net unearned income reported on a child’s tax return subject to the “kiddie tax” is $1,000.

5. The Social Security wage base for 2013 is $113,700, up from $110,100 in 2012. Once tax payers reach this limit, they no longer have to pay the social security tax on their wages. Income above this limit is still subject to Medicare taxes however, which have no annul limit.

We at McAtee and Associates want to insure that taxpayers receive all tax benefits they are entitled to. If you have questions, call us today. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From our CPA office in St. Petersburg, FL – Members of the United States military and their families face many life challenges based on the duties, expenses, and transitions of the military lifestyle. As such, active members of the U.S. armed forces should be aware of the following tax benefits available:

1. Moving Expenses. Active duty members that move because of a permanent change of station may be able to deduct unreimbursed moving expenses.

2. Combat Pay. Military pay received during any month by enlisted members or warrant officers while serving in a combat zone for any part of that month is not taxable. For officers, the monthly non-taxable exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.

3. Extension of Deadlines. The deadlines for filing returns, paying taxes, filing claims for refunds, and other IRS actions are automatically extended for qualifying members of the military.

4. Uniform Costs. Certain costs for purchase and upkeep of uniforms are deductible.

5. Travel to Reserve Duty. Members of the US Armed Forces Reserves can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform reserve duties.

6. Transitioning Back to Civilian Life. Expenses incurred seeking a new job may be deductible. These expenses include travel, resume preparation fees, outplacement agency fees, and other costs.

We at McAtee and Associates want to insure that members of armed forces receive all tax benefits they are entitled to. If you have questions, call us today. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From our CPA office in St. Petersburg, FL – With tax rates potentially set to increase at year end and fewer tax breaks available, traditional Individual Retirement Accounts are a great way for taxpayers to lower their tax bill. And there is still time to make contributions to an IRA for 2012.

In 2012, contributions can be made to a traditional IRA of up to $5,000 ($6,000 for taxpayers 50 or older) or total taxable compensation, whichever is smaller. Taxpayers, and their spouses if married, that are not covered by a retirement plan at work can deduct the full amount of the contribution to a traditional IRA, lowering their tax bill. For taxpayers, or their spouse if married, who are covered by a retirement plan at work, the deduction may be limited based on their income level.

In 2012, IRA deductions will be limited for single or head of household filers with income (modified adjusted gross income or MAGI) above $58,000. Deductions for married filing jointly taxpayers with MAGI above $92,000 will be limited, and for taxpayers not covered by an employer retirement plan but their spouse is, IRA deductions will be limited for MAGI above $173,000.

Taxpayers can also make contributions to a Roth IRA. The total contribution to all IRAs, traditional and Roth, cannot exceed $5,000, $6,000 for taxpayers 50 and older, in 2012. Contributions to Roth IRAs are not deductible. Additionally, contributions to Roth IRAs are limited for single or head of household filers with MAGI of $110,000 or greater, and married filing jointly taxpayers with MAGI of $173,000 or greater.

If you have questions regarding tax benefits of IRAs or other retirement plans, call us today. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

As everyone knows, this Election year is more important than ever. No matter what your party affiliation, it is very important to voice your opinion with your VOTE. The General Election is Tuesday, November 6, 2012. If you have not registered, unsure if you are registered, need to update your address, or do not think you have time, listed below are websites (local & national) that could be of assistance to you. There are fun activities on these sites to get the kids involved in the process also:

www.votepinellas.com

-Choose Supervisor of Elections (you are able to choose what benefits your situation):
-Register to Vote
-Find your Precinct
-Update Address for registration
-See Official Sample Ballot
-Volunteer to be a Poll Worker
-Fun Activities for kids

www.eac.gov
(Election Assistance Commission)

-State Registration Deadlines
-ex: Florida 29 days before the election
-Learn about Elections and Voting
-Voting Assistance Guide for Uniformed and Overseas Citizens
-Volunteering and Contributing to the Election Process
-For Kids
-Kids’ Guide to the Election Process
-How to Become President of the U.S. Poster

From our CPA office in St. Petersburg, FL – The tax rules regarding income received from renting a second home can be complicated, especially if you rent the home for several months of the year and also use the home yourself for part of the year. However, one provision is not complicated, and that is when a taxpayer rents their property for 14 or fewer days. Taxpayer’s renting their vacation home for 14 or fewer days pay no income tax on their rental income. They essentially pocket the money tax-free.

However, income from the rental of a vacation home for 15 days or longer must be reported as taxable income. Expenses related to the rental property are also reported to offset any rental income received. A vacation home is not limited to a house, but also includes apartments, condominiums, mobile homes, and boats.

Also, the IRS considers a vacation home a personal residence if personal use exceeds the greater of 15 days or 10 percent of the total days rented to others. When a taxpayer uses a vacation home as a residence and also rents it to others, expenses must be divided between rental use and personal use. The rental portion of the expenses can be deducted up to the amount of rental income. The personal percentage of mortgage interest and property taxes are deductible on Schedule A.

The 14 day exception discussed above, can also apply to taxpayers who rent their primary residence. Homeowners who live close to vacation destinations such as the beach or mountains may be able to make some extra cash by renting out their personal residence when they go on vacation, as long as it’s two weeks or less. Although taxpayers cannot take depreciation or deduct maintenance expenses, they can still deduct the mortgage interest and property taxes on Schedule A. This 14 day rule can also be used by taxpayers that rent their homes for movie productions, Super Bowls, political conventions or other short term events.

If you have questions regarding the rental of your vacation (or primary) home, call us today. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From our CPA office in St. Petersburg, FL – In recent years, electronic filing and payment options have increased the timeliness and accuracy of tax returns and reduced the burden on taxpayers. However, the law provides that the IRS can assess a penalty on taxpayers who fail to file on time, fail to pay on time or both. Below are some important points about the two different penalties.

1. If a tax return is not filed by the due date (or extended due date) a failure to file penalty will be assessed. If the amount due is not paid by the due date, a failure to pay penalty will be assessed.

2. The failure to file penalty is generally more than the failure to pay penalty. So, if a taxpayer cannot pay all the tax owed, a return should still be filled along with any partial payment. A taxpayer can then consider other payment options.

3. The penalty for filing late is usually five percent of the unpaid balance for each month or part month the return is late. The penalty will not exceed 25 percent of the unpaid tax balance.

4. If a return is filed more than 60 days after the due date or extended due date, the minimum penalty is the lessor of $135 or 100 percent of the unpaid tax.

5. If payment is not made by the due date, a failure to pay penalty will be assessed. This penalty is one half of one percent of the unpaid balance per month or part month after the due date. The penalty will not exceed 25 percent of the unpaid balance.

6. If an extension is filed by the original tax deadline, and a least 90 percent of the actual tax liability is paid by the original due date, a failure to pay penalty will not be assessed if the remaining balance is paid by the extended due date.

7. If both the failure to file and failure to pay penalty apply in any month, the five percent failure to file penalty is reduced by the failure to pay penalty. However, if a tax return is filed more than 60 days after the due date or extended due date, the minimum penalty is the lessor of $135 or 100 percent of the unpaid tax.

8. Either penalty may be reduced or eliminated if a taxpayer can show that the failure to file or pay on time was due to a reasonable cause and not willful neglect.

If you have not filed your tax return yet, don’t delay. Contact us so your returns can be timely filed. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From our CPA office in St. Petersburg, FL – In July 2012, the Supreme Court voted to uphold the new health care legislation, commonly known as the “Affordable Care Act” (ACA) or “Health Care Act.” The new health care law has resulted in several changes to the US tax code. Listed below are some of the major changes effecting most individuals and businesses.

1. Beginning in 2014, US citizens and legal residents who do not qualify for Medicare or Medicaid must obtain minimum essential health care coverage for themselves and their dependents or pay a tax penalty. The tax penalty will vary based on income level and will be indexed for inflation in future years.

2. Also beginning in 2014, many taxpayers will be able to use a refundable tax credit to offset the cost of health insurance premiums. The credit is designed so that health insurance premium payments do not exceed a specific percentage of income. A sliding scale based on family size will be used to determine the amount of the credit.

3. In 2013, the limit for deductible medical expenses increases from 7.5 percent of adjusted gross income (AGI) to 10 percent of AGI. Currently, paid out of pocket medical expense amounts greater than 7.5 percent of AGI are deductible for taxpayers that itemize. The threshold will increase to 10 percent, thus reducing the amount of the benefit.

4. Starting in 2013, wages above $200,000 for individuals and $250,000 for married couples filing jointly will be taxed an additional 0.9 percent for Medicare taxes. Also starting in 2013, there will be a new Medicare tax of 3.8 percent on investment income for single taxpayers with income over $200,000 and for joint filers with income levels above $250,000. Investment income includes interest, dividends, rents, royalties, and gains on disposition of property.

5. Small businesses and tax-exempt organizations that employee 25 or fewer workers with average incomes of $50,000 or less, and pay at least half of the premiums for employee health insurance coverage are eligible for a tax credit. For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent for small tax-exempt organizations. Beginning in 2014, the credit percentage increases to 50 percent and 35 percent, respectively.

6. Effective in 2014, an additional tax will be levied on businesses with 50 or more full-time equivalent employees that do not offer minimum essential health coverage.

7. Effective July 1, 2010, a 10 percent excise tax will be charged on indoor tanning services. This tax does not apply to phototherapy services provided by licensed medical professionals.

Contact us to with any question regarding the new Health Care Act. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From our CPA office in St. Petersburg, FL – If your child is a student and works a summer job or part-time jobs during the school year, then the following should be noted:

1. All taxpayers complete a W-4 when starting a new job. This form is used by employers to determine the amount of tax withholding from each paycheck. Taxpayers with multiple jobs over the year need to be sure they are having an adequate amount of taxes withheld to cover their total income tax liability.

2. Any tip income received is taxable and subject to federal income tax.

3. Many students do odd jobs over the summer or during the school year, such as baby-sitting or lawn mowing. Income from these “self-employment” situations is subject to income tax.

4. Net earnings of $400 or more from self-employment is also subject to the self-employment tax. This tax pays for benefits under the Social Security and Medicare systems. Wage earners have this tax withheld from their paychecks.

5. Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.

6. Special rules apply to services performed as a newspaper carrier or distributor. Taxpayers are considered a direct seller and treated as self-employed for federal tax purposes if (1) they are in the business of delivering newspapers, (2) all pay for services are directly related to sales rather than the number of hours worked, and (3) delivery services are performed under a written contract which states that the seller will not be treated as an employee for federal tax purposes.

7. Generally, newspaper carriers or distributors under the age of 18 are not subject to the self-employment tax.

A student’s work schedule is sometimes a patchwork of odd jobs – which makes for confusion come tax time. Contact us if you have any questions about income earned by your child. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From our CPA office in St. Petersburg, FL – The recent tax court ruling in the case Wandry v. Commissioner will increase the ease and certainty of tax free ownership transfers of closely held businesses from one generation to the next.

Currently, until the end of 2012, taxpayers can give up to $5.12 million in assets under the lifetime tax-free exemption. Additionally, taxpayers can give up to $13,000 of assets per year to as many recipients as they choose. The lifetime exemption will drop to $1 million on January 1, 2013.

Business owners who want to transfer business interests to children or other beneficiaries can use the lifetime exemption to make the shift in ownership tax-free, to the extent the value of the interest transferred is less than the lifetime exemption an annual exclusions. Business owners can also use the $13,000 annual exclusion to transfer smaller pieces of the business each year over time, as opposed to having one large financial exchange.

In the Wandry case, Dean and Joanne Wandry each gave their heirs shares in their family owned business worth $1,099,000. To avoid tax, the Wandry’s specified the gifts should equal the dollar amount of their annual exclusion and lifetime exemption, which were $11,000 and $1 million, respectively, in 2004, the year of the transfer.

To complete the transfer, the Wandry’s were required to obtain a professional appraisal of the business in order to determine the value of the entire business and what percentage of business interests were to be transferred to gift a total value of $1,099,000. After the gift was made, the IRS contested the value of the gifts and reappraised the interests transferred at 20 percent higher than the original valuation.

Despite the IRS’s reassessment of the value of the gifts, the judge in the case believed that the couple did not intend to make any gifts that would exceed the value of their exclusions and exemptions and ruled no further tax was due. This new ruling can also be applied to entities holding publicly traded securities and wealthy families with Family Limited Partnerships.

Contact us for assistance in valuing your small business or other tax matters. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.