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“Taxing” is a word synonymous with “onerous” and “wearing.” Bond Beebe, Accountants & Advisors, have created a user friendly blog called “It’s Taxing” to inform and educate our clients and business associates on timely topics related to tax, estates, accounting and finance. We hope our blog answers your questions and alleviates the heavy burden and anxiety related to understanding complicated tax laws and related matters.
As part of the Affordable Care Act, the IRS was charged with collecting a fee from health insurers and plan sponsors of self-insured plans each year, for seven years, to help fund the Patient-Centered Outcomes Research Institute (PCORI). These so-called “PCORI Fees” are a set fee based on the average number of lives covered by the plan during the year. The fee started at $1 but increases with inflation, and is currently at $2.08 per average number of lives covered for years ended after September 30, 2014 and before October 1, 2015. The fees should stop being collected beyond years ending after October 1, 2019.
Under most plans, the health insurer is responsible for paying the fee and filing. However, if you have a self-insured plan, the plan sponsor is responsible. That is usually the employer in a self-insured plan.
Under a self-insured plan, the employer must file Form 720 (Quarterly Federal Excise Tax Return) and pay the fee using the Electronic Federal Tax Payment System (EFTPS). The form and fee are due July 31, 2015. The form itself is very simple but there is some nuance in calculating the average number of covered lives. More details on that calculation can be found in IRB 2012-52.
The IRS has a detailed Q&A here.
If you need help filing the form, or have any questions, please feel free to contact Bond Beebe.
The Maryland General Assembly has released more details about the Maryland Tax Amnesty Program. This program waives all civil penalties and one half of the interest for delinquent taxpayers who apply and are approved. We shared some information about the Tax Amnesty Program in April. To read more about the program and how it may affect you, visit taxes.maryland.com.
The IRS announced on Tuesday that identity thieves were able to access tax transcript information of more than 100,000 tax accounts through their “Get Transcript” application. Prior knowledge of personal information allowed the criminals to pass a multi-step authentication process to access the tax transcripts. The IRS believes approximately 200,000 attempts to access transcript information were made in total from “questionable e-mail domains” starting in February and ending in mid-May, with more than 100,000 gaining access.
The IRS has temporarily disabled the “Get Transcript” application. They also plan to contact via mail those 200,000 taxpayers whose accounts the criminals had attempted access. For those 100,000 accounts that were successfully accessed, the IRS will be offering free credit monitoring. The letters to those affected are set to be mailed later this week.
You can read the full IRS statement here.
On Monday, May 18th, the Supreme Court ruled that Maryland’s income tax law for income earned outside of the state is unconstitutional. The court voted 5-4 to affirm a 2013 Maryland Court of Appeals decision. The case specifically addressed Maryland’s denial of credits against the MD county income tax, otherwise known as the ‘piggy-back’ local tax. Going forward, residents who earn out-of-state income from certain businesses/sources will be able to claim a credit against the county taxes paid, too. This decision may cost Maryland an estimated $42 million a year in revenue.
Much has been written about the benefits of Roth versus Traditional IRAs, and over the past several
years a popular “backdoor Roth” conversion has made headlines as well. As a refresher, this method allows high-income taxpayers, who are excluded from making direct contributions to Roth IRAs, the ability to make non-deductible contributions to a Traditional IRA, and then immediately convert that amount to a Roth. The net effect, ideally, is minimal tax on any earnings between the date of contribution and the conversion, and years of tax-free growth in a Roth account moving forward. This is especially beneficial for young people who can benefit from growth over time, and can avoid theoretically higher tax rates in the future when distributions may be taken. Furthermore, required minimum distributions do not apply to Roth accounts.
On the surface, there doesn’t appear to be much downside. However, many taxpayers found out the hard way that there can be significant tax implications if other IRAs exist at the time of conversion. This is true because the IRS considers the value of all IRA assets at the time of conversion. For instance, if you had a Traditional IRA account with pre-tax assets of $544,500, made a $5,500 non-deductible IRA contribution and then immediately converted that $5,500 to a Roth account, 99% (or $5,445) would be taxable. In addition to creating an unintended tax liability, it also creates an administrative burden to track the amount on which tax has already been paid.
There have recently been a series of cases decided by the Tax Courts disallowing charitable contributions due to a lack of proper documentation about them. The rules here (under Code Section 170(f)(8)) are precise and strict:
For Maryland individuals and corporations past due on filing Maryland tax returns and paying Maryland taxes, the Maryland legislature has passed a tax amnesty bill which is awaiting the governor’s signature. The amnesty will apply to corporate and individual income taxes, withholding tax, sales and use tax or admissions and amusement tax and will waive all penalties and one half of the interest due. Although the bill takes effect June 1, 2015, the amnesty period will be starting on September 1, 2015 and run through October 31, 2015. See Senate Bill 763 for more information.
Each month, the IRS provides various prescribed rates for federal income tax purposes. These rates, known as Applicable Federal Rates (AFRs), are regularly published as revenue rulings.
The AFRs for April 2015 are as follows:
|Short-Term: 1-3 years||0.48%||0.48%||0.48%||0.48%|
|Mid-Term: >3 & up to 9 years||1.70%||1.69%||1.69%||1.68%|
|Long-Term: >9 years||2.47%||2.45%||2.44%||2.44%|