Tag Archives: small business

How An Accounting Pro Can Help Your Small Business Boom

An Accounting Pro Can Make All the Difference in Your Business Success

It’s true, a professional accountant can provide powerful tax strategies with limited tax obigation, which results in saving money for your small business. One of the most positive qualities that many small business owners share is a burning desire – an insatiable willingness – to “do it all.” It’s what separates entrepreneurs from employees in the first place. An employee is more than willing to set out on the path that someone else has carved for them. An entrepreneur has a need to carve a path for themselves. Continue reading

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Health Reimbursement Plans: Beware of Penalties

2015_08_20 Health Reimbursement Plans2m Health Reimbursement Plans, Healthcare, Health, Reimbursement PlansHealth reimbursement plans and rules have been very interesting these days. They can save you a lot of money, if used appropriately.

Beginning in 2015, large employers defined as those with 100 or more full-time employees must begin offering health insurance coverage to their employees. Then, in 2016, employers with 50 or more full-time employees must do the same or face penalties. These are called the “large employer health coverage excise tax.”

Employers with fewer than 50 full-time employees are never required to offer their employees an insurance plan. However, qualified small employers who do provide coverage may qualify for the small business health insurance credit.

In the past, many smaller employers have simply reimbursed their employees for the cost of insurance. They found it less expensive. And, they had fewer administrative costs than having a group insurance plan. However, under the Affordable Care Act (ACA, or Obamacare for short), a group health plan that reimburses employees for the employees’ substantiated individual insurance policy premiums must satisfy the market reforms for group health plans. Most commentators believe an employer payment plan will fail to comply with the ACA annual dollar limit prohibition. This is because an employer payment plan is considered to impose an annual limit up to the cost of the individual market coverage purchased through the arrangement. Also, an employer payment plan cannot be integrated with any individual health insurance policy purchased under the arrangement. Thus, reimbursement plans may be subject to a very draconian penalty.

Small Business Employers, Did You Get the Notice?

Back in February, the IRS issued Notice 2015-17. This provides small employers limited relief from the stiff $100 per day, per participant, penalties under IRC §4980D for health insurance reimbursement plans that had been addressed in Notice 2013-54. In particular, that notice provided:

    • Transitional relief for employers that do not meet the definition of large employers (i.e., employers with 50 or more employees). This relief is granted for all of 2014 and for January 1 through June 30, 2015; and
  • Relief for S corporations that pay for or reimburse premiums for individual health insurance coverage for 2% shareholders, as previously addressed in Notice 2008-1. The relief period is indefinite, and the IRS states that taxpayers may continue to rely on Notice 2008-1 “unless and until additional guidance” is provided.

The Small Employer Health Reimbursement Relief is Expired

2015_08_20 Health Reimbursement Plans QuoteWell, June 30, 2015 has come and gone. So has the small employer relief. Therefore, employers who still reimburse employees for their medical expenses are in danger of being subject to the $100 per day ($36,500 a year) per employee penalty. Compared to the annual $2,000 penalty that large employers face for not providing insurance to their full-time employees, the penalties on small employers are substantial enough to bankrupt them. What does this mean? The large employer who fails to provide any insurance pays a penalty of only $2,000 per year per employee while the employer who helps employees by reimbursing them for the cost of insurance gets hit with an up to $36,500-per-employee penalty.

This is true even if the employer is a small employer (50 or fewer full-time employees) who is under no legal obligation to provide health insurance plans for its employees. They just want to offer reimbursements simply to help the employees. Does this seem fair? We will let you form your own opinion. You are welcome to leave a comment below to go over to our Facebook or Google+ pages to express your thoughts.

Will Congress step in to alleviate the problem? Maybe yes and maybe no. Employers must decide if it is worth the risk to depend on Congress to act.

There is one firm, Zane Benefits, which claims to have solved the problem with a reimbursement plan that complies with the code. Of course, there are others who argue that it does not.

Bottom Line: Understand your risks if your business has a medical reimbursement plans and consider other options.

If you have questions related to your business and employees or about the tax consequences or benefits regarding health reimbursement plans, please give Alex a call at 781-848-7200. He can help you sort through the tax treatments for you or your business large or small.

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Obama’s 2016 Budget Proposal: Part 2 Gift and Inheritance Provisions

President Obama's 2016 Budget ProposalPresident Obama’s 2016 Budget Proposal for individuals which was recently released, and was presented in Part 1. The blog noted an increase to the taxes on higher-income taxpayers, as well as provide tax breaks for low-to middle-income taxpayers. This week we will discuss some highlights of the President Obama’s 2016 Budget Proposal that would impact individuals and small businesses regarding gifts and inheritance tax provisions. As we mentioned before, please remember, these are proposals only.

If you did not get the chance Part 1, you can click here.

Gift and Inheritance Tax Provisions

Inheritances and Gifts:

  • Would eliminate the current step-up in tax basis at death.
  • Require payment of capital gains tax on the increase in value of securities at the time they are inherited.
  • Generally, a $100,000-per-person, portable-between-spouses exclusion would apply for inherited appreciated assets. This would also have exceptions for surviving spouses, small businesses, charities, and residences, among others.
  • For couples, no tax would be due until the death of the second spouse.
  • No tax would be due on inherited small, family-owned-and-operated businesses unless and until the business was sold. Also, unless any closely held business would have the option to pay tax on gains over 15 years.
  • Couples would have an additional $500,000 exemption for personal residences ($250,000 per individual). This exemption would be automatically portable between spouses.
  • Tangible personal property, other than expensive art and similar collectibles, would be tax-exempt (e.g., bequests or gifts of clothing, furniture, and small family heirlooms).

Inheritance and Gift Tax:

  • Would reinstate the prior, 2009, estate and gift tax rates with lower exclusions (generally at 45% at $3.5 million for estates and $1 million for gifts).

A final reminder, that these are all proposals by the Obama administration and must be approved by Congress. The information is being passed along so you will have an idea of what might happen in the future.

In Part 3 we will put up Obama’s 2016 Budget Proposal for Business Provisions.

Do you have any questions about President Obama’s 2016 Budget Proposal?

Do you have thoughts, questions or concerns about your tax filing? Maybe you need help. Worthtax is not about gimmicks, we don’t waste our money and we wouldn’t waste yours either. WorthTax is a serious business that wants to help you get every penny back that belongs to you. WorthTax has ultra convenient services. Feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

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Tax Season is Here!

Time flies – before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment and learn about our client discounts here.

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