Tuesday, September 29, 2015

How Your Income Affects Your Premium Tax Credit

shared by Neikirk, Mahoney & Smith, a CPA Firm

The Internal Revenue Service says you are allowed a premium tax credit only for health insurance coverage you purchase through the Marketplace for yourself or other members of your tax family. However, to be eligible for the premium tax credit, your household income must be at least 100, but no more than 400 percent of the federal poverty line for your family size. An individual who meets these income requirements must also meet other eligibility criteria.

The amount of the premium tax credit is based on a sliding scale, with greater credit amounts available to those with lower incomes.  Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums.  These payments are called advance payments of the premium tax credit.  If you do not get advance credit payments, you will be responsible for paying the full monthly premium.

If the advance credit payments are more than the allowed premium tax credit, you will have to repay some or all the excess.  If your projected household income is close to the 400 percent upper limit, be sure to consider the amount of advance credit payments you choose to have paid on your behalf.  You want to consider this carefully because if your household income on your tax return is 400 percent or more of the federal poverty line for your family size, you will have to repay all of the advance credit payments made on behalf of you and your family members. 
For purposes of claiming the premium tax credit for 2014 for residents of the 48 contiguous states or Washington, D.C., the following table outlines household income that is at least 100 percent but no more than 400 percent of the federal poverty line:

Federal Poverty Line for 2014 Returns

                                100% of FPL                          400% of FPL
One Individual           $11,490                               up to $45,960
Family of two            $15,510                               up to $62,040
Family of four           $23,550                                up to $94,200

The Department of Health and Human Services provides guidelines for residents of the 48 contiguous states and Washington D.C., one for Alaska residents and one for Hawaii residents. For purposes of the premium tax credit, eligibility for a certain year is based on the most recently published set of poverty guidelines at the time of the first day of the annual open enrollment period for coverage for that year. As a result, the premium tax credit for 2014 is based on the guidelines published in 2013. The premium tax credit for coverage in 2015 is based on the 2014 guidelines.

For more information, you can spend hours digging through irs.gov or you can spend a half hour on the phone with one of the tax professionals at Neikirk, Mahoney & Smith at (502) 896-2999.

Friday, September 11, 2015

Many Businesses Must File Their Tax Returns by Sept. 15

The Internal Revenue Service today reminded corporations and partnerships that took extensions to file their income tax returns by the Sept. 15 deadline, which applies to any business whose fiscal year is also the calendar year.

The IRS continues to see strong growth in corporations and partnerships shifting from paper returns to e-file. As of Aug. 30, more than 6 million corporations and partnerships have electronically filed their returns this year, representing a nearly 8 percent overall increase from the prior year.

Most large corporations and partnerships are already required to e-file. Corporations with $10 million or more in total assets are generally required to e-file Forms 1120 and 1120S. Partnerships with more than 100 partners as defined by their Schedules K-1 filings are also generally required to e-file their returns.

The use of e-file has also shown strong growth this year among businesses not required to use it.

Information on the benefits of e-file and details about the Modernized e-File (MeF) program are available at IRS.gov - or by calling Neikirk, Mahoney & Smith at 502-896-2999. The IRS expects to receive millions more e-filed returns by the deadline.

HIRE Act Update from Neikirk, Mahoney & Smith

Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire certain previously unemployed workers (“qualified employees”).

The first, referred to as the payroll tax exemption, provides employers with an exemption from the employer’s 6.2 percent share of social security tax on wages paid to qualifying employees, effective for wages paid from March 19, 2010 through December 31, 2010.

In addition, for each qualified employee retained for at least 52 consecutive weeks, businesses will also be eligible for a general business tax credit, referred to as the new hire retention credit, of 6.2 percent of wages paid to the qualified employee over the 52 week period, up to a maximum credit of $1,000.

If you have questions, contact Neikirk, Mahoney & Smith CPAs at 502-896-2999.