Author: Leon Clinton

Income tax is often withheld from wages and other types of income such as pensions, bonuses, commissions and gambling winnings. Ideally, taxpayers should try to match their withholding with their actual tax liability. If not enough tax is withheld, they will owe tax at the end of the year and may have to pay interest and a penalty. If too much tax is withheld, they will lose the use of that money until they get their refund.

The earlier in the year you check your withholding, the easier it will be to make sure the correct amount of tax withheld. Here are a few tips:

When Should Taxpayers Check their Withholding?

• When a taxpayer gets a big refund, or finds that they have an unexpected balance due.
• Any time there are personal or financial changes that might affect their tax liability, such as getting married, getting divorced, having a child or buying a home.
• When there are changes in federal tax law that might affect their tax liability.

How to Check the Amount being withheld

Use the IRS Withholding Calculator on IRS.gov. This easy-to-use tool can help figure the taxpayer’s federal income tax withholding so their employer can withhold the correct amount from their pay. This is particularly helpful if they’ve had too much or too little withheld in the past, their situation has changed, or they started a new job.

If your situation is more complicated or you have any questions, don’t hesitate to call the office.

How to Change the Amount being withheld

Events during the year may change a taxpayer’s marital status or the exemptions, adjustments, deductions, or credits they expect to claim on their return. When this happens, taxpayers may need to give their employer a new Form W-4, Employee’s Withholding Allowance Certificateto change their withholding status or number of allowances.

Generally, taxpayers should give their employer a new Form W–4 within 10 days after either:

• A divorce, if they have been claiming married status, or
• Any event that decreases the number of withholding allowances they can claim.

Other Considerations

• Taxpayers, who bought 2015 insurance coverage through the Health Insurance Marketplace, should report changes in circumstances to the Marketplace when they happen. Reporting changes in income or family size will help taxpayers avoid getting too much or too little advance payment of the premium tax credit. Receiving too much or too little in advance can affect the amount of their refund or how much they may owe when they file their tax return.
• Taxpayers may need to include Additional Medicare Tax and Net Investment Income Tax when figuring withholding and estimated tax. Taxpayers may request that employers deduct and withhold an additional amount of income tax withholding from wages on Form W-4 if they are affected by these taxes.

Please call the office if you have any questions or need more information about withholding adjustments.

• By Leon Clinton
• November 23, 2015

The Affordable Care Act includes the individual shared responsibility provision that requires you, your spouse, and your dependents to have qualifying health insurance for the entire year, report a health coverage exemption, or make a payment when you file.

Who is subject to this provision?

All U.S. citizens living in the United States, including children, senior citizens, permanent residents and all foreign nationals are subject to the individual shared responsibility provision.

Children are subject to the individual shared responsibility provision.

• Each child must have minimum essential coverage or qualify for an exemption for each month in the calendar year. Otherwise, the adult or married couple who can claim the child as a dependent for federal income tax purposes will generally owe a shared responsibility payment for the child.

Senior citizens are subject to the individual shared responsibility provision.

• Both Medicare Part A and Medicare Part C (also known as Medicare Advantage) qualify as minimum essential coverage.

All permanent residents and all foreign nationals who are in the United States long enough during a calendar year to qualify as resident aliens for tax purposes are subject to the individual shared responsibility provision.

• Foreign nationals who live in the United States for a short enough period that they do not become resident aliens for federal income tax purposes are not subject to the individual shared responsibility payment even though they may have to file a U.S. income tax return.
• Individuals who are not U.S. citizens or nationals and are not lawfully present in the United States are exempt from the individual shared responsibility provision. For this purpose, an immigrant with Deferred Action for Childhood Arrivals status is considered not lawfully present and therefore, is eligible for this exemption even if he or she has a social security number. Claim coverage exemptions on Form 8965, Health Coverage Exemptions.
• U.S. citizens living abroad are subject to the individual shared responsibility provision.
• However, U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period. In addition, U.S. citizens who are bona fide residents of a foreign country or countries for an entire taxable year are treated as having minimum essential coverage for that year.
• All bona fide residents of the United States territories are treated by law as having minimum essential coverage.

Please call if you have any questions or need more information.

• By Leon Clinton
• November 20, 2015

The healthcare law contains tax provisions that affect employers. The size and structure of a workforce–small or large–helps determine which parts of the law apply to which employers. Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates during the year.

The number of employees an employer has during the current year determines whether it is an applicable large employer for the following year. Applicable large employers (ALEs) are generally those with 50 or more full-time employees or full-time equivalent employees. Under the employer shared responsibility provision, ALEs are required to offer their full-time employees and dependents affordable coverage that provides minimum value. Employers with fewer than 50 full-time or full-time equivalent employees are not applicable large employers.

Employers with Fewer than 50 Employees

SHOP Marketplace Eligibility

Employers with fewer than 50 employees can purchase insurance through the Small Business Health Options Program (SHOP) Marketplace.

Information Reporting–Self-Insured Employers

All employers, regardless of size, that provide self-insured health coverage must file an annual return for individuals they cover, and provide a statement to responsible individuals.

The first information reporting returns are due to be filed in 2016 for 2015.

Credits

Employers may be eligible for the small business health care tax credit if they:

1. cover at least 50 percent of employees’ premium costs
2. have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000
3. purchase their coverage through the Small Business Health Options Program.

Employers with fewer than 50 full-time employees or full-time equivalent employees are not subject to the employer shared responsibility provisions.

Employers with 50 or More Employees

SHOP Marketplace Eligibility

Employers with exactly 50 employees can purchase insurance through the Small Business Health Options Program (SHOP) Marketplace.

Information Reporting

All employers including applicable large employers that provide self-insured health coverage must file an annual return for individuals they cover, and provide a statement to responsible individuals.

Applicable large employers must file an annual return–and provide a statement to each full-time employee–reporting whether they offeredhealth insurance, and if so, what insurance they offered their employees.

The first information reporting returns are due to be filed and furnished in 2016 for 2015.

Payments

In general, an applicable large employer will be subject to a payment if the employer does not offer affordable coverage that provides “minimum” value to its full-time employees and their dependents, and one or more full-time employees gets a premium tax credit.

Various forms of transition relief are available for 2015, including for applicable large employers with fewer than 100 full-time employees, including full-time equivalent employees. For additional details, please call the office.

How the Health Care Law Affects Aggregated Companies

The Affordable Care Act applies an approach to common ownership that also applies for other tax and employee benefit purposes. This longstanding rule generally treats companies that have a common owner or similar relationship as a single employer.

These are aggregated companies. The law combines these companies to determine whether they employ at least 50 full-time employees including full-time equivalents.

If the combined employee total meets the threshold, then each separate company is an applicable large employer. Each company–even those that do not individually meet the threshold–is subject to the employer shared responsibility provisions.

These rules for combining related employers do not determine whether a particular company owes an employer shared responsibility payment or the amount of any payment. The IRS will determine payments separately for each company.

Questions? Don’t hesitate to call.

• By Leon Clinton
• November 18, 2015