tax penalty

Tax

Penalty Relief for Farmers and Fishermen

The Internal Revenue Service announced that it will issue guidance on relief from the estimated tax penalty for farmers and fishermen who are unable to file and pay their 2012 taxes by the March 1 deadline due to the delayed start for filing tax returns.

The American Taxpayer Relief Act (ATRA), which was signed into law in early January affected several tax forms that are often filed by farmers and fishermen, including Form 4562, Depreciation and Amortization (Including Information on Listed Property).

The IRS is providing this relief because delays in the agency’s ability to accept and process these forms may affect the ability of many farmers and fishermen to file and pay their taxes by the March 1 deadline. The relief applies to all farmers and fishermen, not just those who must file late released forms.

Normally, farmers and fishermen who choose not to make quarterly estimated tax payments are not subject to a penalty if they file their returns and pay the full amount of tax due by March 1. Under the guidance to be issued, farmers or fishermen who miss the March 1 deadline will not be subject to the penalty if they file and pay by April 15, 2013. A taxpayer qualifies as a farmer or fisherman for tax-year 2012 if at least two-thirds of the taxpayer’s total gross income was from farming or fishing in either 2011 or 2012.

Farmers and fishermen requesting this penalty waiver must attach Form 2210-F to their tax return and can be submitted electronically or on paper. If you’re a farmer or fisherman and need to request a penalty waiver, do not hesitate to call us. We can help.

Tax

Tax Due Dates for January 2013

January 10 Employees – who work for tips. If you received $20 or more in tips during December, report them to your employer. You can use Form 4070, Employee’s Report of Tips to Employer.
January 15 Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in December 2012.Individuals – Make a payment of your estimated tax for 2012 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES. This is the final installment date for 2012 estimated tax. However, you do not have to make this payment if you file your 2012 return (Form 1040) and pay any tax due by January 31, 2013.Employers – Nonpayroll Withholding. If the monthly deposit rule applies, deposit the tax for payments in December 2012.

Farmers and Fishermen – Pay your estimated tax for 2012 using Form 1040-ES. You have until April 15 to file your 2012 income tax return (Form 1040). If you do not pay your estimated tax by January 15, you must file your 2012 return and pay any tax due by March 1, 2013, to avoid an estimated tax penalty.
January 31 Employers – Give your employees their copies of Form W-2 for 2012 by January 31, 2013. If an employee agreed to receive Form W-2 electronically, post it on a website accessible to the employee and notify the employee of the posting by January 31.Businesses – Give annual information statements to recipients of 1099 payments made during 2012.Employers – Federal unemployment tax. File Form 940 for 2012. 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 11 to file the return.

Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the fourth quarter of 2012. 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 11 to file the return.

Employers – Nonpayroll taxes. File Form 945 to report income tax withheld for 2012 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 11 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 2012. Filing your return and paying any tax due by January 31 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 2012. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is $2,500 or more from 2012 but less than $2,500 for the fourth quarter, deposit any undeposited tax or pay it in full with a timely filed return.
Tax

Tax Implications of the Health Care Act

The July 2012 Supreme Court ruling upholding what’s collectively referred to as the “Affordable Care Act” (ACA) or “Health Care Act” has resulted in a number of changes to the US tax code. As such there are a number of tax implications for individuals and businesses. With that in mind, let’s take a closer look at what it might mean for you.

Individuals

Individual Mandate
Starting in 2014, US citizens and legal residents not qualified for Medicare or Medicaid must obtain minimum essential health care coverage for themselves and their dependents or pay a tax penalty that varies based on income level. In 2014, the basic penalty for an individual (no dependents) is $95, with substantial increases in subsequent years–$325 in 2015 and $695 in 2016, indexed for inflation thereafter.

Refundable Tax Credit
Effective in 2014, certain taxpayers will be able to use a refundable tax credit to offset the cost of health insurance premiums so that their insurance premium payments do not exceed a specific percentage of their income. Qualified individuals are those with incomes between 133 percent and 400 percent of the federal poverty level. A sliding scale based on family size will be used to determine the amount of the credit. In addition, married taxpayers must file joint returns to qualify.

FSA Contributions
FSA (Flexible Spending Arrangements) contributions are limited to $2,500 per year starting in 2013 and indexed for inflation after that.

New Rules for HSAs and Archer MSAs
Tax on non-qualified distributions from HSAs and Archer MSAs that are used to cover the cost of over the counter medicine without a script will increase to 20 percent starting in 2011. Medical devices, eyeglasses, contact lenses, copays, and deductibles are not affected, nor is Insulin even if it is non-prescription.

Medicare Part D
Medicare Part D, the tax deduction for employer provided retirement prescription drug coverage, will be eliminated in 2013.

Increase in AGI Limit for Deductible Medical Expenses
The deduction is currently 7.5 percent of AGI, but next year, in 2013, that increases to 10 percent of AGI. The 7.5 percent threshold continues through 2016 for taxpayers aged 65 and older, including those turning 65 by December 31, 2016.

Health Coverage of Older Children
The cost of employer provided health care coverage for children (through age 26) on tax returns is excluded from gross income.

Medicare Tax Increases for High Income Earners
Starting in 2013, there will be an additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly).

Also starting in 2013, there is a new Medicare tax of 3.8 percent on investment (unearned) income for single taxpayers with modified adjusted gross income (MAGI) over $200,000 ($250,00 joint filers). Investment income includes dividends, interest, rents, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts and self-employed individuals are all liable for the new tax.

Exemptions are available for business owners and income from certain retirement accounts, such as pensions, IRAs, 401(a), 403(b), and 457(b) plans, is exempt.

Businesses

Small Business Health Care Tax Credit 
Small businesses and tax-exempt organization that employ 25 or fewer workers with average incomes of $50,000 or less, and that pay at least half of the premiums for employee health insurance coverage are eligible for the Small Business Health Care Tax Credit. For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities. An enhanced version of the credit will be effective beginning Jan. 1, 2014. In general, on Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.

Additional Tax on Businesses Not Offering Minimum essential Coverage
Effective in 2014 an additional tax will be levied on businesses with 50 or more full-time equivalent (FTE) employees that do not offer minimum essential coverage. Employers with fewer than 50 FTE employees are exempt from the additional tax.

Excise Tax on High Cost Employer-Sponsored Insurance 
Effective in 2018, a 40 percent excise tax indexed for inflation will be imposed on employers with insurance plans where the annual premium exceeds $10,200 (individual) or $27,500 (family). For retirees age 55 and older, the premium levels are higher, $11,850 for individuals and $30,950 for families.

Excise Tax on Medical Devices
Effective January 1, 2014, a 2.3 percent tax will be levied on manufacturers and importers on the sale of certain medical devices.

Indoor Tanning Services
A 10 percent excise tax on indoor tanning services went into effect on July 1, 2010. The tax doesn’t apply to phototherapy services performed by a licensed medical professional on his or her premises. There’s also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee.

If you need assistance navigating the complexities of the new health care act, don’t hesitate to call us. We’re here to help.

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