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.

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.

Filing an Amended Tax Return

From Neikirk, Mahoney & Smith CPAs, here are the Internal Revenue Services' Top 10 Tax Tips about Filing an Amended Tax Return

We all make mistakes so don’t panic if you made one on your tax return. You can file an amended return if you need to fix an error. You can also amend your tax return if you forgot to claim a tax credit or deduction. Men with big dogs won't show up at your door if you goof, but here are some tips to help you handle this sort of thing.

1. When to amend.  You should amend your tax return if you need to correct your filing status, the number of dependents you claimed, or your total income. You should also amend your return to claim tax deductions or tax credits that you did not claim when you filed your original return. The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list more reasons to amend a return.

Note: If, as allowed by recent legislation, you plan to amend your tax year 2014 return to retroactively claim the Health Coverage Tax Credit, see IRS.Gov/HCTC first for more information.

2. When NOT to amend.  In some cases, you don’t need to amend your tax return. The IRS usually corrects math errors when processing your original return. If you didn’t include a required form or schedule, the IRS will send you a notice via U.S. mail about the missing item.

3. Form 1040X.  Use Form 1040X to amend a federal income tax return that you filed before. Make sure you check the box at the top of the form that shows which year you are amending. Since you can’t e-file an amended return, you’ll need to file your Form 1040X on paper and mail it to the IRS.

Form 1040X has three columns. Column A shows amounts from the original return. Column B shows the net increase or decrease for the amounts you are changing. Column C shows the corrected amounts. You should explain what you are changing and the reasons why on the back of the form.

4. More than one year.  If you file an amended return for more than one year, use a separate 1040X for each tax year. Mail them in separate envelopes to the IRS. See "Where to File" in the instructions for Form 1040X for the address you should use.

5. Other forms or schedules.  If your changes have to do with other tax forms or schedules, make sure you attach them to Form 1040X when you file the form. If you don’t, this will cause a delay in processing.

6. Amending to claim an additional refund.  If you are waiting for a refund from your original tax return, don’t file your amended return until after you receive the refund. You may cash the refund check from your original return. Amended returns take up to 16 weeks to process. You will receive any additional refund you are owed.

7. Amending to pay additional tax.  If you’re filing an amended tax return because you owe more tax, you should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.

8. Corrected Forms 1095-A.  If you or anyone on your return enrolled in qualifying health care coverage through the Health Insurance Marketplace, you should have received a Form 1095-A, Health Insurance Marketplace Statement. You may have also received a corrected Form 1095-A. If you filed your tax return based on the original Form 1095-A, you do not need to file an amended return based on a corrected Form 1095-A.  This is true even if you would owe additional taxes based on the new information. However, you may choose to file an amended return.

In some cases, the information on the new Form 1095-A may lower the amount of taxes you owe or increase your refund.  You may also want to file an amended return if:

 You filed and incorrectly claimed a premium tax credit, or
 You filed an income tax return and failed to file Form 8962, Premium Tax Credit, to reconcile your advance payments of the premium tax credit.
Before amending your return, if you received a letter regarding your premium tax credit or Form 8962 you should follow the instructions in the letter.

9. When to file.  To claim a refund file Form 1040X no more than three years from the date you filed your original tax return. You can also file it no more than two years from the date you paid the tax, if that date is later than the three-year rule.

10. Track your return.  You can track the status of your amended tax return three weeks after you file with “Where’s My Amended Return?” This tool is available on IRS.gov or by phone at 866-464-2050.

Still have questions? Contact Neikirk, Mahoney & Smith at (502) 896-2999.

Freshly released income statistics

The Internal Revenue Service today announced the availability of Statistics of Income—2013, Individual Income Tax Returns Complete Report (Publication 1304). U.S. taxpayers filed almost 147.4 million individual income tax returns for tax year 2013, up 1.7 percent from 2012. The adjusted gross income less deficit reported on these returns fell $6.5 billion, which is a 0.1-percent decrease from the prior year.

The report is based on a sample drawn from the 147.4 million individual income tax returns filed for tax year 2013 and provides estimates on sources of income, adjusted gross income, exemptions, deductions, taxable income, income tax, modified income tax, tax credits, self-employment tax, and tax payments.

Classifications include tax status, size of adjusted gross income, marital status, age, and type of tax computation.

Other interesting stats include:

• High-Income Tax Returns for 2012. For 2012, there were more than 5 million individual income tax returns with an income of $200,000 or more, accounting for almost 4 percent of all returns for the year. The total number of returns with incomes of $200,000 or more increased by almost 12 percent compared to the total number of returns at that income level for 2011.

• Foreign-Controlled Domestic Corporations, 2012. Although foreign-controlled domestic corporations made up just over one percent of all corporate Federal income tax returns filed for tax year 2012, they accounted for about 16 percent of all corporate receipts – $4.7 trillion and held more than 14 percent of corporate assets – about $12.3  trillion. 

If you'd like to learn more about these or any other tax-related subjects, contact Neikirk, Mahoney & Smith at (502) 896-2999 or visit us online at http://nmscpas.com/

Taypayer Bill of Rights

If you've never seen this before, it's certainly worth reviewing again as we plow our way toward 4th Quarter. Brought to you by the tax professionals at Neikirk, Mahoney & Smith.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. Know your rights and understand the nation's obligations to protect them.

The Right to Be Informed
Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.

The Right to Quality Service
Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.

The Right to Pay No More than the Correct Amount of Tax
Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.

The Right to Challenge the IRS’s Position and Be Heard
Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.

The Right to Appeal an IRS Decision in an Independent Forum
Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.

The Right to Finality
Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.

The Right to Privacy
Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.

The Right to Confidentiality
Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.

The Right to Retain Representation
Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

The Right to a Fair and Just Tax System
Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

If you have questions, don't hesitate to contact Neikirk, Mahoney & Smith at 502-896-2999.

Is your small business growing?

That's the thing about small business. It's either growing or its dying!
If you're among the lucky ones - we all know it isn't just "luck" - your accounting needs are going to be changing as quickly as your business is growing.
That's why you should seek out the advice of one of Louisville's leading accounting firms, Neikirk, Mahoney & Smith.
They can help you plan the right financial strategies you're going to need to make sure your business is ready to meet the challenges that lie ahead.
Do something good for your business. Call Neikirk, Mahoney & Smith today. 502-896-2999.