Author: Leon Clinton

Starting with this year’s filing season, taxpayers must report certain information related to health care coverage on their 2014 tax return when they file this April. In addition, taxpayers must provide proof of health insurance coverage or that they have received an exemption.

With that in mind, let’s take a look at how the Affordable Care Act might affect your tax situation, and based on your type of coverage, which new tax forms you might be receiving.

Tip: For additional information about IRS tax forms related to health care insurance, please see the article, Health Care Law: Changes to IRS Tax Forms, below.

Overview

The biggest change for most taxpayers is found on Line 61 of Form 1040, where individuals must either check a box to show they had health insurance or pay a penalty. In general, the penalty applies to individuals who did not have health insurance for more than three months in 2014.

In 2014, the penalty is the greater of one percent of modified adjusted gross income or $95 per adult ($47.50 per child under age 18, up to a maximum of $285 per family). While the IRS cannot issue a lien against you in order to make you pay the penalty, they are allowed to withhold the money from your refund.

Certain persons may qualify for an exemption from the penalty such as those who do not need to file a tax return ($10,150 for individuals, $13,050 for heads of household, and $20,300 for a married couples filing jointly). Other exceptions (there are eight in total) include being a member of a federally recognized tribe or qualifying for a hardship exemption if you filed for bankruptcy in the last 6 months or had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt.

Caution: Taxpayers who believe they qualify for an exemption must apply and receive an exemption certificate from the Marketplace.

There’s an additional twist for the approximately eight million people who purchased health insurance through the Healthcare Marketplace (“the Exchanges”), many of whom received subsidies that were paid to insurance companies and applied directly to their insurance premiums.

What taxpayers might not realize is that in many cases these subsidies were based on household size and income for 2012. Remember, the enrollment period began October 1, 2013 before taxpayers had filed their 2013 tax returns.

If income or household size changed in 2014 and the IRS was not notified of these updates, taxpayers may be liable for paying additional subsidy monies or conversely, receive refunds for amounts overpaid. In other words, if you received a bonus in 2014 (change in household income), it could mean that you owe the government money.

Enrollment through an Employer, Private Insurance, Medicaid or Medicare

New Tax Forms: 1095-B, 1095-C

1095-B. If your healthcare coverage is provided by private insurers or self-funded plans, you should receive Form 1095-B; however, because tax year 2014 is a transition year, these forms are not required when filing your 2014 tax return.

1095-C. If your healthcare coverage is provided by your employer, you should receive Form 1095-C; however, because tax year 2014 is a transition year, these forms are not required when filing your 2014 tax return.

Enrollment through the Healthcare Marketplace

New Tax Forms: 1095-A, Form 8962

Form 1095-A. If you purchased health insurance from the Marketplace you will receive Form 1095-A showing details of your coverage such as the effective date, amount of your premium payment, and any advanced premium credit you received.

Form 8962. The amount of any advanced premium credit you received in 2014 is reported on Form 8962. This form is also used to figure out the actual premium credit as well.

No Health Insurance

If you DO qualify for an exemption: Taxpayers must apply for the exemption from the Marketplace and if approved, will receive an exemption certificate number, which must be reported on Form 8965.

If you DO NOT qualify for an exemption: Taxpayers that do not qualify for an exemption and are uninsured are required to pay a penalty (see above) when filing their tax return. Form 8965 is used to calculate the penalty.

Don’t hesitate to call or email with any questions about the ACA and your taxes.

• By Leon Clinton
• February 4, 2015

February 2

Employers – Give your employees their copies of Form W-2 for 2014 by February 2, 2015. If an employee agreed to receive Form W-2 electronically, post it on a website accessible to the employee and notify the employee by February 2, 2015.

Businesses – Give annual information statements to recipients of 1099 payments made during 2014.

Employers – Federal unemployment tax. File Form 940 for 2014. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you already deposited the tax for the year in full and on time, you have until February 10 to file the return.

Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the fourth quarter of 2014. Deposit any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return.

Employers – Nonpayroll taxes. File Form 945 to report income tax withheld for 2014 on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, gambling winnings, and payments of Indian gaming profits to tribal members. Deposit any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

Individuals – who must make estimated tax payments. If you did not pay your last installment of estimated tax by January 15, you may choose (but are not required) to file your income tax return (Form 1040) for 2014. Filing your return and paying any tax due by February 2, 2015 prevents any penalty for late payment of last installment.

Payers of Gambling Winnings – If you either paid reportable gambling winnings or withheld income tax from gambling winnings, give the winners their copies of Form W-2G.

Certain Small Employers – File Form 944 to report Social Security and Medicare taxes and withheld income tax for 2014. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is $2,500 or more from 2014 but less than $2,500 for the fourth quarter, deposit any undeposited tax or pay it in full with a timely filed return.

All businesses – Give annual information statements to recipients of certain payments you made during 2014. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be issued electronically with the consent of the recipient.

Forms 1099-B, 1099-S, and certain reporting on Form 1099-MISC, Miscellaneous Income, are due to recipients by February 17. Payments that may be covered include the following:

• Cash payments for fish (or other aquatic life) purchased from anyone engaged in the trade or business of catching fish.
• Compensation for workers who are not considered employees (including fishing boat proceeds to crew members).
• Dividends and other corporate distributions.
• Interest.
• Rent.
• Royalties.
• Payments of Indian gaming profits to tribal members.
• Profit-sharing distributions.
• Retirement plan distributions.
• Original issue discount.
• Prizes and awards.
• Medical and health care payments.
• Debt cancellation (treated as payment to debtor).
• Cash payments over $10,000. See the instructions for Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

February 10

Employees – who work for tips. If you received $20 or more in tips during January, report them to your employer. You can use Form 4070.

 Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the fourth quarter of 2014. This due date applies only if you deposited the tax for the quarter in full and on time.

 Farm Employers – File Form 943 to report Social Security and Medicare taxes and withheld income tax for 2014. This due date applies only if you deposited the tax for the year in full and on time.

 Certain Small Employers – File Form 944 to report Social Security and Medicare taxes and withheld income tax for 2014. This tax due date applies only if you deposited the tax for the year in full and on time.

 Employers – Nonpayroll taxes. File Form 945 to report income tax withheld for 2014 on all nonpayroll items. This due date applies only if you deposited the tax for the year in full and on time.

 Employers – Federal unemployment tax. File Form 940 for 2014. This due date applies only if you deposited the tax for the year in full and on time.

February 17

Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in January.

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in January.

Individuals – If you claimed exemption from income tax withholding last year on the Form W-4 you gave your employer, you must file a new Form W-4 by this date to continue your exemption for another year.

All businesses. Give annual information statements to recipients if certain payments you made during 2014. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be issued electronically with the consent of the recipient. This due date applies only to the following types of payments.

• All payments reported on Form 1099-­B,
• Proceeds From Broker and Barter Exchange Transactions.
• All payments reported on Form 1099, Proceeds From Real Estate Transactions.
• Substitute payments reported in box 8 or gross proceeds paid to an attorney reported in box 14 of Form 1099-­MISC.

February 18

Employers – Begin withholding income tax from the pay of any employee who claimed exemption from withholding in 2014, but did not give you a new Form W-4 to continue the exemption this year.

March 2

Businesses – File information returns (Form 1099) for certain payments you made during 2014. These payments are described under February 2. There are different forms for different types of payments. Use a separate Form 1096 to summarize and transmit the forms for each type of payment. See the 2014 Instructions for Forms 1099, 1098, 5498, and W-2G for information on what payments are covered, how much the payment must be before a return is required, what form to use, and extensions of time to file.

If you file Forms 1097, 1098, 1099, 3921, 3922, or W-2G electronically (not by magnetic media), your due date for filing them with the IRS will be extended to March 31. The due date for giving the recipient these forms is still February 2.

Farmers and Fishermen – Farmers and fishermen. File your 2014 income tax return (Form 1040) and pay any tax due. However, you have until April 15 to file if you paid your 2014 estimated tax by January 15, 2015.

Payers of Gambling Winnings – File Form 1096, Annual Summary and Transmittal of U.S. Information Returns, along with Copy A of all the Forms W-2G you issued for 2014. If you file Forms W-2G electronically (not by magnetic tape), your due date for filing them with the IRS will be extended to March 31. The due date for giving the recipient these forms remains February 2.

Employers – File Form W-3, Transmittal of Wage and Tax Statements, along with Copy A of all the Forms W-2 you issued for 2014.

If you file Forms W-2 electronically (not by magnetic media), your due date for filing them with the SSA will be extended to March 31. The due date for giving the recipient these forms is still February 2.

Employers – with employees who work for tips. File Form 8027,Employer’s Annual Information Return of Tip Income and Allocated Tips. Use Form 8027-T, Transmittal of Employer’s Annual Information Return of Tip Income and Allocated Tips, to summarize and transmit Forms 8027 if you have more than one establishment. If you file Forms 8027 electronically (not by magnetic tape), your due date for filing them with the IRS will be extended to March 31.

• By Leon Clinton
• February 1, 2015

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck are:

• 57.5 cents per mile for business miles driven, up from 56 cents in 2014
• 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
• 14 cents per mile driven in service of charitable organizations

These optional standard mileage rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously). Call us if you need additional information about these and other special rules.

In addition, basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) Plan were also announced by the IRS.

Let us know if you have any questions about standard mileage rates and which driving activities you should keep track of as tax year 2015 begins.

• By Leon Clinton
• January 17, 2015