Tax Questions

Question:  How am I affected by the Affordable Care Act?

Answer:  Beginning in 2014, unless your are covered by an exemption, you are required to maintain basic health insurance coverage (known as minimum essential coverage) for yourself and any of your dependents, or pay a shared responsibility payment (a penalty). The requirement to maintain coverage or pay a penalty is generally called the “individual mandate.”

The penalty is the lesser of: (i) the greater of a flat dollar amount or a percentage of your household income, or (ii) the national average premium for the lowest-level plan providing minimum essential coverage. You must make the shared responsibility payment when you file your federal income tax return. Married individuals who file a joint return for a tax year are jointly liable for any shared responsibility payment.

You can satisfy the minimum essential coverage standard (and not be subject to a penalty) if you and your dependent are enrolled in a qualified health plan offered by an Exchange, a qualified employer-sponsored plan (including a government plan), a government plan, such Medicare, Medicaid or CHIP (Children's Health Insurance Program), or any other health coverage plan recognized as affording minimum essential coverage.

Note that minimum essential coverage does not include, workers compensation insurance, disability insurance, dental or vision benefits, long-term care benefits, and Medigap or MedSupp insurance.

If you are an exempt individual, such as a non-U.S. citizen, incarcerated individual, member of certain religious sects or health care sharing ministries or a member of an Indian tribe you will not be subject to the individual mandate. In addition, low income taxpayers, taxpayers for whom basic coverage is unaffordable and taxpayers who qualify under a hardship exemption are not required to maintain minimum essential coverage. Moreover, under the short coverage gap exception, any individual who doesn't maintain minimum essential coverage for less than three consecutive months will not be subject to the penalty for failure to maintain coverage.

The above is a very simplified explanation of the individual mandate. Please call me if you would like to discuss how this requirement will affect you and your family.

Question:  Why do I have to efile?  

Answer:  Actually, you can elect out of e-file by completing another tax form--who wants to do that?  The IRS Oversight Board made it's annual report to Congress in December 2012.  The Internal Revenue Service Restructuring and Reform Act of 1998 set forth the 80 percent goal for all major individual, business, and tax-exempt returns by 2012. For individual returns, we have achieved an 81% rate and the board estimates the e-filing rate for that broader group of returns to be 71 percent.  

In addition, individuals who file their returns electronically consistently report a much higher satisfaction level with the filing process than do the individuals who file their returns on paper—based on the American Customer Satisfaction Index (ACSI) score for individual return filers compiled by the University of Michigan and its associates. 

E-filing reduces errors, results in faster refund times, and is safe and secure.  The IRS is now estimating a 7-10 day refund time for e-filed returns with electronic deposit of the refund.

Question:  What are the changes for the home office deduction?

Answer:  In Rev. Proc. 2013-13, the IRS has announced a safe harbor home office deduction limited to $1500 (We get a deduction of $5 per square foot of qualifying home office space, limited to no more than 300 square feet).  You can make the election to use this safe harbor method or to calculate and substantiate actual expenses for purposes of § 280A on a year by year basis.  

This won't apply to 2012 tax returns.  The revenue procedure is effective for taxable years beginning on or after January 1, 2013.

Question:  Did they fix the AMT?  (Alternative Minimum Tax)

Answer:  Yes.  They set the limits to the 2011 amounts and indexed them for inflation.  The crazy "patch" is now replaced with real legislation.