Obama's Health Care Plan and Tax Deductions

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Obama's Health Care Plan and Tax Deductions

Jul 15, 2012 Posted by Sanjiv 1 Comment

As many of you may know that starting 2014 Obama’s healthcare plan will kick in that may allow low income families to enroll in qualified health care plan and claim the insurance premium as tax credit.  However, some of us are still wondering what if qualified health plan offered by the Obma’s health care plan is cheaper than the one offered by our employer.    Can we switch to different plan?  If we make the switch, can we still deduct premium?

Answers to these questions are equally important to the employers.   Employers would like to predict their exposure to the employer responsibility excise imposed should if they offer the healthcare that does not provide minimum value (What is the minimum value?), or is unaffordable.   After all, employers want to know if they should continue with their health plans or not?

“Have IRS not finalized the rules?” you may ask.  You can read T.D. 9590 published by the IRS and Treasury Department.  You will find many rules to determine eligibility for and calculation of the tax Code section 36B refundable health insurance premium tax credit added by the Patient Protection and Affordable Care Act, as amended.   These rules address many matter e.g treatment of required waiting periods, or relief from erroneous automatic enrollment in an employer-sponsored plan.  But at the same time they leave many issues for future guidance and public interpretation.

For example, Employers can find out when employer plan coverage is affordable for the employee by using a simply formula (i.e., the employee’s contribution is no more than 9.5% of household income) but do not address whether coverage is affordable for related individuals who can enroll in the employer plan.

Many groups are working closely with IRS and Obama’s administration to finalize the rules and calculation methods to determine how much premium should be deductable.  Tax payers are also being invited by the IRS to comment on these matters.

Would like to share your thoughts on this matter?

What Are The Available Medical Deduction Plans?

Jun 22, 2012 Posted by Dolly No Comments

A medical deduction plan helps to reduce tax on medical expenses.  This type of plan is beneficial for one who has to spend excessively for medical issues.   Medical deduction plans allow a person to qualify for tax exemptions. However to file tax return on medical expenses it is essential for an individual to present all supporting medical documents.

Tax Deductable Expenses

Tax deduction for medical expenses is available for a large number of issues. One can get deduction on diagnosis cost, cost of treatments and even cost of medical supplies.

 Medical deduction plans are available for the following issues generally.

  •  Fees payable to doctors and dentists
  • Expenses that one has to pay for medicines that are prescribed by a doctor.
  • For medical aids and equipments like pacemakers, wheel chairs, hearing aids and dental equipments.
  • Charges of weight loss program which is prescribed by a doctor.  However, the charges of low calorie foods can not be tax-deductable.
  • Travel expenses due to medical treatment.
  •  The cost of any type of surgery including eye surgery and cosmetic surgery.

However one point to remember is that medical expenses that improve general health such as vitamin deficiency are not tax-deductable.

Who can have the benefits of tax deduction?

  • A tax payer can deduct medical expenses for his/her own medical treatment, cost of equipments and surgery.
  • A tax payer can receive tax deduction for the treatment of spouse.
  • A tax payer can claim tax deduction for medical issues of a person who is dependant on him/her.

  Is there any exposure for non dependant?

IRS generally offers no tax deduction offers for the non dependants. However, in some special cases tax deduction rules can be changed.

  • IRS does not offer any coverage for a non dependant even if it is one’s own child. But if the child is a non-dependable according to the law of divorce or separation.
  •  A tax payer can not claim a person as dependant if he/she gets $3,700 and more.

 

How to apply for tax deduction?

 

A tax payer can claim deduction of medical and dental expenses if the services were made during the tax year.  An applicant can apply for tax deduction when the payment is complete. This is applicable for each type of payment, such as online payment, payment by phone or credit card.

Deduction plans for long term medical expenses

IRS offers tax deduction for long term medical expenses.  If a person suffers long time from a severe medical issue, he / she can claim tax deduction for diagnostic, therapeutic, treatment and personal care cost. In order to avail a long tern medical deduction, one must meet all criterions as specified by IRS.

  • Medical issues must be of chronic type:  a person can be diagnosed as chronic sufferer if he /she has been suffering for one year or more and is unable to perform daily activities without substantial co operation.  if the mentioned person requires extensive care to maintain personal care and
  • Diagnosis, treatment and all other necessary medical services should be executed under the supervision of a recognized doctor or medical practitioner.

 What should be included in long term medical deduction plans?

Tax deduction can also be granted for the following issues.

  •  Expenses of meals that a person takes at a hospital or nursing home. However, such meals must be part of medical care.
  •  Charges paid for medical conference including transportation and admission costs. The time of conference must involve medical sessions. A person is not capable to claim tax deduction for fooding and lodging charges that he/she has to pay during the medical conference.
  •  IRS offers tax deduction for medicines, injections and other medical supplies those are prescribed by a certified medical practitioner. For diabetes patient, the charge of insulin is deductable without prescription.
  •  A chronic patient some times requires additional nursing services to perform regular activities. In such case, cost to appoint a nurse or an attendant or a care-giver is deductable.
  •  Cost of operation, eye surgery can be tax deductable. On the other hand IRS does deduct amounts that are spent due to unnecessary surgical treatments such as some kind of cosmetic surgery, artificial implantation etc.

IRS offers tax deduction for certain issues. These are mentioned in the following points.

  • Stop smoking program
  • Psychoanalysis
  • Sterilization
  • Pregnancy test kits
  • Special education
  • Weight loss program

Issues that are not tax deductable

  • Childcare services for a healthy baby
  • Cosmetic Surgery except for a medical requirement.
  • Weight loss program that is only for general health and appearance improvement.
  • Household service
  • Electrolysis
  • Expenses for funeral
  • Hair Transplant
  • Illegal surgical treatments
  • Cost of insurance Premiums
  • Imported drugs and medicines
  • Nutritional Supplements
  • Fees for Veterinary treatment
  • Diaper Service

 

 

 

 

 

 

 

 

A To Z Of Home Office Tax Deductions

Jun 22, 2012 Posted by Dolly No Comments

If you have a home based business you can save money by availing home office tax deductions. The IRS allows you to save money on insurance, mortgage, repairs and other utilities, if you have an office at home. Home office deductions are applicable for all kind of homes irrespective of apartments, flats and even mobile homes. So if you are wondering how to claim a home deduction this article will provide you with all the basic information.

Requirements for home deductions

The internal revenue service or the IRS has created certain specific requirements that must be met with to claim home office deductions. They are as follows:

  1. Regular use: For you to claim home office tax deductions you have to work from your home on a period of over two years.
  2. Exclusive use: You can also be eligible for home office deductions if you use your home exclusively for work. You can either have a separate area for work or a room within your house but it must only be used for work-purpose.
  3. Principal place for your work: Your home must serve as a principal area for your work. You cannot claim for tax deductions if you use your house occasionally for the purpose of your business. But even if you have another office at some other location but use your house regularly for client meeting and other administrative and executive purposes you can easily be eligible for home office tax deductions.
  4. What percentage of the house is being used: Another requirement that will decide the deductible amount is what percentage of the house is being used for work. So before you file your house deduction claim you need to understand what percentage of the house is used for work if you are using more than one room or only a portion of a room as your home office.

Rules for employees

The IRS has specified a couple of other rules for employees claiming home office deductions. So if you are an employee in addition to the above stated rules you would also have to comply with these other criterion.

  • For an employee looking for home deductions he must show that his working from home is actually more beneficial for the employer. You can easily claim home office deductions if your office does not provide any space for you to work in their location and you have to work from home. However the IRS does not have any specific rules to judge if your work is actually beneficial for your employer. They base their decision on facts and circumstantial information.
  • You cannot be eligible for tax deductions if you rent a part of your home to the employer and use that part to work for that same company.

What can you save

Filing for a home office tax deductions can reduce your tax bills considerably. If you meet all the required compliance criterion you can easily save a lot by home tax deductions. The IRS will deduct mortgage insurance, rent, repair, real estate taxes, depreciation and any other type of utilities.

However your deductible amount will depend on the percentage of the house you are using for your work.

Also if your income is lesser than the expenditure incurred for your business your deductions will be constrained.

How to file your claim

If you are thinking of claiming your home office deductions and you are meeting all the compliance criterion you can easily reduce a considerable portion of your tax bills. Here is how you can claim your home office deductions.

 

Self employed: For those who are self employed and using their homes as office they have to fill Form 8829 to understand the amount of deduction they will be eligible for. Then this amount has to be stated in Schedule C.

Employees: Employees have a different procedure of filing home office deductions. If you are an employee you can calculate your deductible amount using the work sheets of IRS publication 587. Once you have calculated your deductions you can then claim them as itemized deductions on Schedule A.

These are the basic information that one needs to know and follow to file a home office tax deduction. Successfully filing your claim can easily reduce a considerable amount of tax burden from your shoulders.

Tax Issues Affected by Estate Planning

Jun 4, 2012 Posted by Dolly 1 Comment

It is wrongly judged that estate planning is free from income tax compliance. The truth is that when a client is filing for income tax return, the individual has to plan meticulously on how to itemize properties so that tax expense can be curbed to some extent. Careful practitioners try to balance both factors: estate arrangement techniques and tax compliance. Following are some important points that a practitioner should keep in mind while planning estate arrangements for a client:

                                                                                                    

Family Loan:

 

One of the most popular wealth management methods is to transfer property rights/ loan out cash to family members. For instance it’s easier for a son/daughter to pay back “intra-family loan” at minimum interest (under IRC sec. 7872) than to clear home loan debts, taken from a bank or a private creditor.

 

Also the family sentiment which help heirs put up with financial problems is one reason which makes intra-family loan more popular. To go by the proceeding, an intra-family loan agreement document is drafted. It acts as a promissory memorandum. The practitioner, it is advised should keep a copy of this document.

 

The creditor charges a minimum interest from the benefactor who, as per rules and terms penned in the loan agreement, is required to pay back the debt amount. Most of the agreements are time bound and the tax returns are filed in the name of the lender. In case the interest amount falls within a tax-return deductible slab, it must be shown by the borrower.

Also the income and the interest payment terms should be in sync as per the loan agreement doc. The borrower should not skip payments; otherwise, the whole purpose of revenue management becomes futile.

 

Compensation Issues:

 

S corporation return deals with reasonable compensation possibilities which can help save payroll taxes.  Under Sec. 1402(a) shareholders can apply for compensation by filing personal Form 1040. However there are many key issues that might affect estate planning for the client.

 

Unreasonable high compensation demand implies that a client is still interested to derive profit from business partnership, gifts and family property handovers. Gifting stocks or shares to heirs is one of the most judicious ways of doing justice to estate planning. However if the parent lender continues to extract interest amount over prolonged period then IRS can debate on and preside over the matter.

 

The tricky part is that if the creditor is sanctioning gifts to GRATS (grantor retained annuity trust) that is trying to gain an absurdly low compensation then it could unveil the ‘real’ estate-arrangement plans and put at stake all possibilities to save payroll taxes.

 

Therefore a practitioner must be alert not to stress much on compensation; rather they must understand how the process works and how it must be approached at.

 

Grantor Trusts

 

Grantor trusts, a very popular technique for asset protection and estate planning, must be included in the trust provisions when a client transfers his assets to an irrevocable trust. The ubiquitous revocable living trust is a common grantor trust used to segregate gift assets from inherited assets. Mostly used in determining equal share in divorce proceedings, living trusts are often used to avoid probate.

 

The Beneficiary Defective Irrevocable Trust (BDIT) caters to the child alone and not the parent because if the trust is established by the child’s parent or any other benefactor for that matter it includes an annual demand called the Crummy power for the child/ benefactor which makes the child its rightful trust. BDIT should be handled with precision different from the traditional ones. Again all those assets’ immunity stands jeopardised under revocable living trusts if assets received as gifts or inheritance by the client are use to pay income tax.

 

Insurance Transfer for Value Rules

 

If an insurance transfer is not subjected to IRC Sec.101(a)(2), its proceeds then are income tax free. Transfer for value rules are triggered only if it takes place between a corporation and a shareholder and not between two partners in a partnership. Following this life insurance transfers that appears on any return must be investigated to avoid transfer for value rules.

 

Disregarded LLCs

 

In order to bring down the administrative expenses of a business partnership, clients often prefer utilizing ‘single member ignored Limited Liability companies’. The only disadvantage of this policy is that if a lawsuit is filed against the client then the executive organ of the government can investigate all personal accounts of the client. Filing a Schedule C on the other hand much guards income information of an individual.  

 

Schedule B: Titles To Assets

 

In 2010 the IRS sanctioned the “asset portability” tax act. This provision allows the surviving spouse to ignore estate tax payment in a de-coupled state. However this provision is only limited to state tax exemption policies and does not work at the federal level.  The practitioners on the other hand, more often follow the traditional technique of paying subsidy to a trust in the name of the deceased. But it seems that there are many loop-holes in the asset portability act which the IRS needs to address.

 

Non-retirement asset division, balancing property distribution etc should be carefully planned by the practitioner so as to avoid complications while preparing Schedule B concerning Titles to Assets.

Know How To Distinguish Independent Contractors

Jun 4, 2012 Posted by Dolly No Comments

Independent contractors are those people or businesses who provide freelance services to other companies. As they are not qualified as employees of a company, the independent contractors are not liable to enjoy any employment taxes or benefits. As employers can save a lot on employee’s taxes and other benefits with independent contractors, they classify many employees as independent contractors to save money on payroll taxes. To stop this practise there are certain factors that can distinguish an independent contractor from an employee.

Understanding The Concept Of Independent Contractors

 

Having a clear understanding of the concept of independent contractors is the first element to distinguish between them and an employee. An independent contractor can be a person or a company that offers its services to another company. What makes them different is that these contractors follow their own schedule and work as per their own free will. So the employer company has a limited hold on these independent contractors. The employer companies cannot regulate which jobs the contractors accept or how much pay they will demand and when they will work on a certain project.

 

Another point of difference between independent contractors and employees is that, the independent contractors will usually bring in their own supplies, or have some kind of investment in equipments. The employer company also is not liable to provide any insurance or any compensation to them.

 

Determining Ways To Identify Independent Contractor

As hiring independent contractors relieves the employer of giving payroll taxes and other liabilities, many companies list a portion of their employees as independent contractors to save taxes. Some companies also outsource their work to the independent contractors to achieve the same goal.  Therefore, the IRS has the knowledge of few factors with which they can identify a contractor from an employee.

 

  1. The first thing that IRS notices is the way the employers exerts his authority on the worker. If it is an independent contractor the employer will only give details about the work but if it is an employee, the employer can exercise more control over the way he works, how it is ultimately carried out and his performance. So if the employer is giving out a more defined and whole set of instructions the worker is considered as an employee. Whereas if the instructions are limited and the worker has the freedom to execute a project on his own terms then he is considered an independent contractor.
  2.  IRS will consider any worker to be an employee if the employer can regulate the way the worker gets paid or if it is the employer who provides all the tools and supplies. Whereas if the worker is paid in accordance to the job done, can offer his services to other companies at the same time or has a considerable amount of investment on the supplies used for the job then the worker is considered as an independent contractor. In addition, if the worker faces profits or losses in a certain work then he is an independent contractor.
  3. If the worker and the employer has a written contract and if the employer is liable to pay insurance, casual leave and sick leave then the worker is considered to be an employee. Another way to identify an independent worker is to check if the worker expects to work for the employer only for a specific period of time then the worker can be classified as an independent contractor.

 

These are the factors through which the IRS distinguishes an employee from an independent contractor. It is crucial for the employer to classify his workforce properly as miscalculation can make one liable for penalty and payment of all possible dues.

 

 

 

Road Block To Retirement

May 20, 2012 Posted by Sanjiv No Comments

Have you ever wondered if you may hit a road block in your journey to retirement ?

I will cover some basic strategies that can help you limit the damage caused by an unexpected event or change of lifestyle.

A Protracted Illness | 21st Century Major Crisis

Nursing home care is super expensive both in India and United States.   Nursing home cost can exceed well over $250/day in US.  In a recent phone call with Kiser, I was told that paying $500/night for stay at hospital is a great deal. Well – may be for Kiser, not for me.

If your family has a history of health problem than you should consider long term care insurance.   At least have a plan in place to deal with such situation.  You don’t want to end up spending all your retirement saving on nursing home.

Starting or Selling a Business 

Having a second stream of income during retirement can be very helpful.  Consider buying a business that has long history of profitable years and has a good management team in place.   Real estate management company and good running restaurants can be great investments.

You want to delay collecting from social security as much as possible.  Consider using income from roth IRA, investment and businesses during early part of your retirement.

Divorce : Don’t even think about it

Divorce can cause all sorts of problem including major financial issues.  You can do some damage control by purchasing annuity but try to avoid divorce as much as possible.

Taking care of Kids or Grand Kids

Supporting kids and grand kids during retirement can take big chunk of your savings.  Carefully plan your retirement with your CPA to see how much you can spare to help your kids.  You can also consider buying life insurance policy or funding a 529 college saving plan for your grand kids.

Volatile Markets 

Retirement is not the right time to invest in volatile markets.  You want to play safe bets but talk to a financial adviser who can find safe bets with good returns.

 

Thinking about retirement ? Here are few questions you can ask your Financial Advisor ?

  • Which income should i draw from first?
  • What other cost should i consider?
  • As I get closer to retirement, how should I adjust my allocation ?
  • Which options for covering health care costs make the most sense for my situation?
  • How often should I make changes to portfolio?

Tax Deductions for Independent Contractor or 1099

May 13, 2012 Posted by Sanjiv No Comments

Starting out a consulting business can be very lucrative. However, it can also result in heavy tax bill you do not organize your income and expense properly.   So, how do you organize your income and expenses?

You can start by opening a different bank account.  Do not mix your business bank account with your personal bank account. All business related income should come to this account and all expenses should be paid from this account.   Your client will send you form 1099-misc at the end of the year.  IRS will also reactive a copy of this 1099.  That being said your total business income should be greater or equal to the amount listed in 1099.  You may get an automated customer generated audit if you report total income less than the amount listed on your 1099.  Keeping a separate bank account will help in calculating total business income and you act as proof in case of audit.

Now you need to deal with your business expenses.   Easiest way to do this is to categories your business expenses.   We recommend you use same or similar categories listed on schedule C.  This will help during tax time.  Now, every time you pay a bill, you simply need to enter that transaction in the correct category.  You can use a simple spread sheet, financial software or you can use shoe-box.  Most CPA firms also provide bookkeeping services. For example, you can simply send us your bank statement at the end of the month and we can do the complete bookkeeping. We will assign each expense into an appropriate categories based upon its tax implication.

What are some of the most popular business expense categories ?

  • Advertising – All expenses paid for online marketing or print marketing including business cards or flyers.
  • Consultation Fees – Fee paid to professionals like attorney, CPA, or marketing professionals.
  • Insurance Cost –  Business Insurance Expenses including life, property & casualty, or business insurance
  • Interest Cost – Interest cost of your business loans. You can include fees and other related cost.
  • Office expense – Any supply or equipment you purchase for your business operation.
  • Rent or lease other business property – Cost of operating your business office.
  • Repairs and maintenance – Include all cost related to your business only.
  • Travel – the cost of traveling to a business related event like convention, meeting, or business trip
  • Meals and entertainment – You can include meals and entertainment expenses related to your business.
  • Utilities –electricity, gas, telephone, internet
  • Other expenses – such as Dues & Subscriptions, Web development, and Business telephone expenses.

 

Health Insurance expenses:  Premiums paid for your health insurance are tax deductible.   You can deduct the full cost of health insurance premiums on form 1040 but you must have an Income from you business.   You can deduct the health insurance cost event if you run into losses but it has to be reported different.  Consult with your CPA to ensure you are reporting the deduction properly.

Still have a question about your business expense?  Leave us a comment or call our office at 510-825-7563

What You Must Know About 2012 Tax Challenges

Apr 2, 2012 Posted by Sanjiv 1 Comment

What You Must Know About 2012 Tax Challenges

2012 presidential election summons the close of all tax benefits introduced by George Bush. This would usher in an unavoidable clash because of the new tax rules, many deductions and unchanged tax rates.

It is indeed tough to prepare a perfect tax return sheet amidst changing rules and implementation of stringent penalties. Therefore in this article we are to take a look at how to tackle the most common filing challenges

Newly implemented Capital profit rules

Worried about how to calculate taxes on you invested income this year? Heres the key rule: bought stocks after Jan 1, 2011 then you are not eligible to count your cost basis or the tax exempt investment amount. Your broker will help you calculate the amount as per your preferred method. Mostly brokers send notice of FIFO; First-in and First-out which reports your selling off older shares. Before filing or tax return analyze 1099 and ask your broker to mend all errors. Talking about 1099, Roman Ciosek, wealth management assistant at HighTower’s Strata is advising customers to slow down in their tax filing process. According to Ciosek there will be a number of amendments on the 1099s. However if you have sold your earlier shares whether willingly or because your broker advised you then you cannot alter your cost-basis.

$1billion in unclaimed tax refunds

Apart from what is discussed above, everything more or less remains in place. You can jolly well counterbalance your gains with losses. While doing so first take into account the long term (considered over a year) profits on assests that incurred tax at or over 15% and balance them with your long term losses; then balance short term gains taxed as minimum income with short term losses. Having calculated the long term accounts and the short term income separately, now you are required to match your long term records to the short term report.  If your loss margin is high considering deducting a little near to $3000 from your income. This way you will be able to manage all taxable amount the next year as well.

How to plan: when you proceed with tax filing you can choose to toggle between accounting ways. Your common options are “last-in”, “first-out” & “Specific share identification”.

Before using FIFO it is a better idea to select particular stocks / shares that you want to sell. This is more appropriate when you have pitched in at over-time stock selling program and have derived your biggest profit out of the initial batch. On the other hand if you have great many capital losses with which you can counterbalance your capital profits then 2012 is a good year to enjoy good number of tax benefits.

This calculation will be same when accounting for mutual funds, dividend-reinvestment plans, exchange-traded funds and 2013 bonds. If you haven’t received any mails yet from your broker’s company, then wait till you get your options to choose a particular method of calculating your tax amount. Don’t treat the paper work casually.

Retirement plans

Filing challenge: If you have plans to finance Roth IRA for 2011, then better have it done before April 17, 2012. IRA is a tax deductible scheme which will provide you a tax concession on your investment, but will calculate taxes on withdrawal of money from this traditional plan. Roth requires you/other liable people to pay upfront taxes. This is one reason why the Roth is considered good investment idea for long-term by most tax-payers.

The changes were introduced in 2010 that everyone could convert their IRA to Roth irrespective of income group. This is indeed facilitating unless you have an exorbitant tax bill. However to calculate tax-return for 2012 you have to abide by the conversions introduced in 2011.

IRS warns of ‘dirty dozen’ tax scams

To tide over your 2010 tax payments if it took you two years then you are required to clear all due amounts this filing season 2012. The time is ticking already and you have only until the filing day to undo 2011 alterations.

How to plan: open or reinvest in IRA for 2012 and also transfer an existing IRA into Roth. Such conversion will help you trim down higher tax rate during your retirement days (than what you have to pay now). For those that were planning to go ahead with conversion plans this is the right time to take the call. If the conversion is done before the Bush tax laws expire then you won’t be required to pay more than 35% on the upturn, which by the year end can go up much higher than what is anticipated.

Home selling: Not a very good idea

Filing challenge: If you are happy to have earned much after selling off your house then wait, your profit might as well come under taxable charges. For single home sellers anything above $250,000 will be taxable. For married couples the same rule applies on a marginal amount of $500,000.

Wondering what happens if you sell your house at an under-rated price? You will be considered unlucky, simply because you can’t file for tax-return on the initial amount / cost of your residence. However if you lent your house out on a mortgage and the contract period was cut short by reconstruction/ restoration purpose  then you might as well get a tax-break. Such deals are also applicable on conditions such as short-notice sale or when losing your home to foreclosure. This type of tax-breaks means liberation from paying due debts.

Should you buy a home in 2012?

How to plan: This tax-break plan closes this year 2012. So in case you want a tax break, then better not waste time.

Education tax cuts

Filing challenge: the American government though has been lenient with educational grants; however some important scholarships are schemed as tax-cut loans. Sorting these educational tax cuts is difficult. Some of the variety of schemes are the lifetime learning credit taxable over $2,000 per return, the American opportunity credit tax-free till $2,500 per undergraduate student, the tuition and fees deduction $4,000 max for a single student per family. However you can only file one application for education tax cut per year.

Get help to solve your tax doubts

According to Justine Ransome, national tax officer at Grant Thornton the American opportunity credit is the biggest money saver scheme. Taxes are sorted as per income brackets/slabs; but American Opportunity Credit provides the highest tax-cut, $180,000 for married couples and half the amount for singles.

How to plan: Bad luck the American opportunity credit expires this year but well you will have various simpler choices the following year.

Health care write-offs

Filing challenge: health care costs will be deductible at higher rates. This means that you can file for only those that surpasses 7.5% of you Adjusted Gross Income. But it seems likely that increasing medical costs can wrap the matter neat and tidy. Allison Shipley, PricewaterhouseCoopers’ principal of personal financial services opines that if a person’s income is drastically reduced and the medical expenses increases on the other hand, then the individual can produce all medical expense bills and enjoy tax-cuts.

It’s saving time:

Heres what the tax-cut expenses include: general physician and dentist’s bills , doctors prescription, medications, specs, hearing kits, wheel-chairs, patient’s transportation, consultation fees, care-giver charges and a few insurance costs.

Don’t Miss Out on the Small Business Health-Care Tax Credit

Mar 27, 2012 Posted by Sanjiv No Comments

I am sure you won’t mind taking some more business tax credits.   Here is another tax credit, if you are a small business employer with less than 25 employees who are earning average wage of less than $50,000 a year and you pay at least 50% of the employee’s insurance premiums.

This tax credit is targeted towards tax exempt organizations and small businesses.  This credit allows small business owners to offer health insurance for the first time.

Here is the scope of health insurance tax credit:

  • You take this credit as part of the general business credit.  You can use the form 3800 and any unused general Business Credit, would be included with the tax return.  This unused credit can be carried back one year and then forward for up to 20 years.
  •  You must have less than 25 full time employees.  Number of employees is calculated by calculating total number of hours and total number of employees.
  • Average annual wage should also be less than $50,000.  Once again, this is calculated based upon FICA wages and total number of full time employees.
  • Tax credit is for Small Business Owners or Tax-Exempt Organization.
  • Businesses who can’t take credit for 2011 may be eligible to take advantage in future years.  Small employers can claim this credit between 2010 to 2015.

Now the question you are waiting for, How much tax credit?

Maximum credit for small business employers is 35% of premiums paid.  For tax exempt employers the maximum tax credit is 25% of premium paid.

Want more good news?

Beginning in the year 2014, the tax credit will go up to 50% of premiums paid and 35% for tax exempt organizations.

Please note tax credit is on the amount you pay for health care premiums.  Credit is not on employee paid premium.   With up to 50% tax credit, I am sure you would love to offer healthcare for your employees.

Want to take credit this year? Call our office for an appointment.

Do You Have Unclaimed Property Waiting For You? Check Now.

Feb 29, 2012 Posted by Sanjiv No Comments

What happens to all the checks that are sent by companies but never deposited?  Can companies keep that money in their bank account and use it for something else.  Answer is No, they can’t.

Good news is that there is a law to prevent holders of Unclaimed Property from using your money and taking it into their business income. This law gives the State an opportunity to return your money and provides California citizens with a single source, the State Controller’s Office, to check for Unclaimed Property that may be reported by holders from around the nation.

According to the recent number I collected, The State of California is currently in possession of more than $6.1 billion in Unclaimed Property belonging to approximately 17.6 million individuals and organizations.  Yes, this is not a typo. It is $6.1 billion dollars.

The State acquires unclaimed property through California’s Unclaimed Property Law, which requires “holders” such as corporations, business associations, financial institutions, and insurance companies to annually report and deliver property to the State Controller’s Office after there has been no customer contact for three years. Often the owner forgets that the account exists, or moves and does not leave a forwarding address or the forwarding order expires. In some cases, the owner dies and the heirs have no knowledge of the property.

The most common types of Unclaimed Property are:

  • Bank accounts and safe deposit box contents;
  • Stocks, mutual funds, bonds, and dividends;
  • Uncashed cashier’s checks or money orders;
  • Certificates of deposit;
  • Matured or terminated insurance policies;
  • Estates; and
  • Mineral interests and royalty payments, trust funds, and escrow accounts.

The Unclaimed Property law was enacted Please visit the Unclaimed Property Database to see if the State Controller’s Office is holding Unclaimed Property for you. Learn more about the Unclaimed Property Program at State Controller John Chiang’s website.