Tax

With the 2017 tax filing season in full swing, it’s not too early to think about how the health care law affects your taxes. The Affordable Care Act requires you and each member of your family to do at least one of the following:

• Have qualifying health coverage called minimum essential coverage
• Qualify for a health coverage exemption
• Make a shared responsibility payment with your federal income tax return for the months that you did not have coverage or an exemption

If you meet certain criteria for the tax year, you may be exempt from the requirement to have minimum essential coverage. You will not have to make a shared responsibility payment for any month that you are exempt. Instead, you’ll file Form 8965, Health Coverage Exemptions, with your federal income tax return. For any month that you do not qualify for a coverage exemption, you will need to have minimum essential coverage or make a shared responsibility payment. You may be exempt if you meet one of the following:

• The lowest-cost coverage available to you is considered unaffordable
• You have a gap in coverage that is less than three (3) consecutive months
• You qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage or belonging to a group specifically exempt from the coverage requirement

The Federally-facilitated Marketplace is no longer granting exemptions for members of a health care sharing ministry, members of Indian Tribes, and incarceration. Eligible individuals can still claim these exemptions on a tax return. For a full list of exemptions and how to claim them, please call.

Federal tax returns that do not reflect at least one of these options–reporting health care coverage, claiming a coverage exemption or reporting a shared responsibility payment–will be rejected if the return is filed electronically. If filed on paper, tax returns that do not reflect at least one of these options will take longer to process and any refunds will be delayed. You should respond promptly to IRS correspondence about your health care coverage.

Questions?

To find out if you’re eligible for a coverage exemption or must make a payment, don’t hesitate to contact the office. Help is just a phone call away.

• By Leon Clinton
• February 25, 2017

Day camps are common during school vacations and the summer months. Many parents enroll their children in a day camp or pay for day care so they can work or look for work. If this applies to you, your costs may qualify for a federal tax credit. Here are 10 things to know about the Child and Dependent Care Credit:

1. Care for Qualifying Persons. Your expenses must be for the care of one or more qualifying persons. Your dependent child or children under age 13 generally qualify.

2. Work-related Expenses. Your expenses for care must be work-related. In other words, you must pay for the care so you can work or look for work. This rule also applies to your spouse if you file a joint return. Your spouse meets this rule during any month they are a full-time student. They also meet it if they are physically or mentally incapable of self-care.

3. Earned Income Required. You must have earned income. Earned income includes wages, salaries and tips. It also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care.

4. Joint Return if Married. Generally, married couples must file a joint return. You can still take the credit, however, if you are legally separated or living apart from your spouse.

5. Type of Care. You may qualify for the credit whether you pay for care at home, at a daycare facility or at a day camp.

6. Credit Amount. The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on your income.

7. Expense Limits. The total expense that you can use in a year is limited. The limit is $3,000 for one qualifying person or $6,000 for two or more.

8. Certain Care Does Not Qualify. You may not include the cost of certain types of care for the tax credit, including:

• Overnight camps or summer school tutoring costs.
• Care provided by your spouse or your child who is under age 19 at the end of the year.
• Care given by a person you can claim as your dependent.

9. Keep Records and Receipts. Keep all your receipts and records for when you file taxes next year. You will need the name, address and taxpayer identification number of the care provider. You must report this information when you claim the credit on Form 2441, Child and Dependent Care Expenses.

10. Dependent Care Benefits. Special rules apply if you get dependent care benefits from your employer.

Keep in mind this credit is not just a school vacation or summer tax benefit. You may be able to claim it at any time during the year for qualifying care. For more information, please call the office.

• By Leon Clinton
• February 23, 2017

Updated income-tax withholding tables for 2017 have been released. The newly revised version contains percentage method income-tax withholding tables and related information that employers need to implement these changes.

In addition, employers should continue withholding Social Security tax at the rate of 6.2 percent of wages paid. The Social Security wage base limit remains at $127,200. The Medicare tax rate remains at 1.45 percent each for the employee and employer.

The additional Medicare tax of 0.9 percent for employees (not employers) remains in effect and should be withheld from employee wages that exceed $200,000 in a calendar year, at the beginning in the pay period in which the employee’s wages exceed $200,000.

In 2017 the amount for one withholding allowance on an annual basis is $4,050. Employers should start using the revised withholding tables and correct the amount of Social Security tax withheld as soon as possible in 2017, but not later than February 16, 2017. For any Social Security tax under-withheld before that date, employers should make the appropriate adjustment in workers’ pay as soon as possible, but not later than March 31, 2017.

Employers and payroll companies handle the withholding changes, so workers typically won’t need to take any additional action, such as filling out a new W-4 withholding form. Individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms.

As always, it’s prudent for workers to review their withholding every year and, if necessary, fill out a new W-4 to give to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms.

Please call the office if you have any questions about income tax withholding in 2017.

• By Leon Clinton
• February 22, 2017