How Latest Tax Changes Will Affect You or Your Company

The U.S. Supreme Court ruling on June 28, 2012, upheld the Patient Protection and Affordable Care Act of 2010.  Individuals and business owners can expect to see several changes over the next few years depending on the results of the presidential election on Tuesday, November 6.  Listed below are a few highlights of the upcoming changes.

2012

Affordable Care Act – If you are a business owner, continue to uphold the laws within the Affordable Care Act that are already in effect such as allowing coverage of dependents up to age 26.

Changes in W-2 Forms – Business owners will notice changes in their employees’ W-2 forms in 2012.  The value of employee coverage will show up on the W-2 under box 12 with the code DD to identify the amount.  Both the portion paid by the employer and the employee will be shown.  The coverage listed is not taxable and will only be used for information purposes.

2013

Health Insurance Requirements for Business Owners – Business owners must offer health plans that do not discriminate as to eligibility or benefits.  For instance, eligibility for health plans may not be instant for certain employees and have a waiting period for others.  The same comprehensive benefits of the health insurance plan must also be offered to all employees instead of a select few exceptional employees.

Health Coverage Tax Credits End – Many small businesses providing health care coverage to employees will receive tax credits through 2013.

Flexible Spending Accounts – Flexible Spending Accounts (FSAs) will also see changes.  Beginning on January 1, 2013, annual contributions to FSAs for medical expenses will be limited to $2,500.  If your company uses a fiscal year instead of a calendar year for Flexible Spending Accounts, then a new plan should be implemented to ensure employees do not contribute more than the $2,500 maximum limit for the 2013 tax year.  Married couples may each contribute $2,500 to their employer’s FSA plan to total $5,000; however, one cannot contribute $4,000 to theirs and the other $1,000 to total the $5,000.  If a spouse has two jobs, he or she is permitted to contribute the $2,500 to each FSA plan.

Deduction Floor Changes – In 2013, the deduction floor for unreimbursed medical expenses is rising to 10% of adjusted gross income instead of the 7.5% used in prior years.

Additional Medicare Rate – Employees who earn more than $200,000 (over $250,000 if married filing jointly) a year will begin paying an additional rate of 0.9% into Medicare in 2013.

Tax Raise on Unearned Income – A 3.8% Medicare tax on unearned income will also go into effect for those who earn more than $200,000 (over $250,000 if married filing jointly).  The tax will be on interest, dividends, rents, royalties, passive income, annuities and taxable capital gains.  Please read An Overview of the Medicare Surtaxes by Dent, Baker Partner, Trey Whitt for an in depth look at how the new provisions apply to you.

2014

Tax Penalties Begin on Businesses – By 2014, penalties for businesses not providing health care coverage will go into effect.

Tax Penalties Begin on Individuals – Beginning in 2014, a penalty of $95 or up to 1% of income, whichever amounts to more money, will be taxed on those who do not acquire health insurance coverage. The insurance must meet the federal government’s minimum coverage standards in order to escape the additional tax.

2016

Tax Penalty Rises – In 2016, the tax for those who choose not to purchase health insurance will go up to $695 for individuals, $2,085 for families, or 2.5% of income (if that amounts to a larger sum).

Right Now

Your finances are important.  You work hard to provide and need to know where your money is going and why.  Dent, Baker and Company, LLP is an accounting firm you can trust to stay current on tax laws to ensure you receive maximum tax returns and stay informed.  After all, planning is essential and Dent, Baker has done its homework.

We look forward to assisting you with your financial needs.  Please contact us with questions and concerns at 205-871-1880. You can also visit our website www.dentbaker.com to learn more about our accounting firm and each CPAs’ expertise and specializations.