On May 24th, the IRS announced the successful start of its new web-based system, known as IRS Direct Pay, on IRS.gov.

The system allows taxpayers to pay their tax bills or make tax payments directly from checking or savings accounts without any fees or pre-registration and offers a 30-day advance payment scheduling, rescheduling or cancellations, as well as a payment status search.

IRS Direct Pay simplifies the payment process by allowing taxpayers to establish an account with no waiting period and receive instant confirmation of their payment on a system that is available 24 hours a day, seven days a week.

Currently, IRS Direct Pay accepts only 1040 series return payments, including estimated tax payments, proposed tax assessments, extension payments, and amended return payments spanning from tax years 1993-2014.

To use this program, the IRS must first verify the taxpayer’s name, address, filing status, social security number and date of birth from a prior year tax return. Contact your local Padgett office to see how this new system can simplify your life!

For more information, contact Padgett Business Services in Bothell, Washington at (425) 408-1695. We handle your bookkeeping, accounting, tax (personal & business) and payroll needs – so you can focus on what makes you money. Serving Bothell, Lynnwood, Kenmore, Mill Creek and surrounding areas.

On June 10th, the Internal Revenue Service adopted a “Taxpayer Bill of Rights” to help the public understand their rights when dealing with the IRS. These rights have been grouped into ten categories as follows:

1. The Right to Be Informed: Taxpayers have the right to know what they need to do to comply with the tax laws and are entitled to clear explanations of IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts.
2. The Right to Quality Service: Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.
3. The Right to Pay No More than the Correct Amount of Tax: Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.
4. The Right to Challenge the IRS’s Position and Be Heard: Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.
5. The Right to Appeal an IRS Decision in an Independent Forum: Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.
6. The Right to Finality: Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.
7. The Right to Privacy: Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.
8. The Right to Confidentiality: Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.
9. The Right to Retain Representation: Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

10. The Right to a Fair and Just Tax System: Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

For more information, contact Padgett Business Services in Bothell, Washington at (425) 408-1695. We handle your bookkeeping, accounting, tax (personal & business) and payroll needs – so you can focus on what makes you money. Serving Bothell, Lynnwood, Kenmore, Mill Creek and surrounding areas.

Retirement planning has grown increasingly difficult due to demographic, social, and financial factors. From rising health care costs to longer life expectancy rates, and an estimated 10,000 Baby Boomers turning 65 each day, future retirees are faced with many challenges.

So, what is the best strategy for aging taxpayers to ensure that they will have enough money to sustain their lifestyle after retirement and cover possible long-term health care costs as they age? Unfortunately, there is not a simple answer. Financial planners do suggest considering the following factors.

• If you believe that Social Security will be a viable benefit when you retire, you will want to determine the best strategy to maximize these benefits. AARP and T.Rowe Price have free online calculators to help taxpayers determine how and when to claim benefits. You may also, for a nominal fee, use certain websites such as www.maximizeMySocialSecurity.com  and www.SocialSecurityChoices.com.
• As long-term care costs continue to rapidly increase, do your current assets allow for self-insuring or should you consider purchasing Long Term Care Insurance?
• If you are more concerned with “running out of money” or “dying with too much money leftover,” you may want to begin monitoring your expenditures closely and re-evaluating your financial positions quarterly.

What are your options for the money that is in your employer’s retirement plan? The amount of the monthly payout will depend on the amount in the account and your age. Remember to consider your tax bracket when you begin taking distributions as these are taxed at your ordinary income tax rate.

For more information, contact Padgett Business Services in Bothell, Washington at (425) 408-1695. We handle your bookkeeping, accounting, tax (personal & business) and payroll needs – so you can focus on what makes you money. Serving Bothell, Lynnwood, Kenmore, Mill Creek and surrounding areas.

2014 Healthcare Action Plan

All employers (large or small) should be aware of how the Affordable Care Act (ACA) affects their business. All employers are required to provide new employees with a Notice of Availability of Insurance at the time of hire. For additional information on this notice, please revisit Part 2 of the SmallBiz Builder Health Care Trilogy.

In addition, all employers should track hours of service by workers (unless obviously a Small Employer with less than 50 workers) to determine whether the employer mandate applies to their business and if so, does it take effect in 2015 or 2016. For more information, please revisit Part 2 of the SmallBiz Builder Healthcare Trilogy.

Below are some specific action steps that can be taken now to ensure compliance with the ACA.

Large Employers (100 or more employees for 2015 or 50 or more employees for 2016)  

• Identify full-time and full-time equivalent employees and their dependents.
• Consider the potential “No offer” penalty of $2,000 per full-time employee over 30 full-time employees, if one or more employees obtain insurance from the state exchange and qualify for a premium assistance credit. (See related article on page 3 of this issue).
• Consider the “Inadequate offer” penalty (due to lack of Affordability and/or Minimum value) of $3,000 per employee that obtains insurance from the exchange with a premium assistance credit. The total penalty cannot be larger than the “No offer” penalty. (See related article on page 3 of this issue).
• Consult with your insurance agent to consider “quick fixes” to your current health plan that may be more cost effective than paying the penalty.
• Consider converting full-time workers to part-time employment. (See related article on dumping employees on page 3 of this issue).
• Evaluate other current health benefit plans (Cafeteria, HRA, etc.) offered to the employees and verify they comply with the requirements of ACA.
• Communicate to employees any changes you are making to your employee benefit plans as a result of the ACA and be ready for questions.
• Prepare for reporting the required information to the IRS.
• Consider whether replacing your current health insurance plan with a group plan (including SHOP) is beneficial to the business and its employees.
• Consider whether dropping health insurance as an employee benefit and increasing employee salaries is more beneficial to the business and employees. This allows them to obtain health insurance coverage (including any premium assistance credit) through the exchange.
• Evaluate any other health benefit plans (Cafeteria, HRA, etc.) offered to employees and verify their status under the ACA.
• Consider whether the Small Business Health Care Credit is available for the business (fewer than 25 employees with an average salary under $50,000).

Small Employers (Less than 100 employees for 2015 or less than 50 employees for 2016)  

Before the passage of the ACA in March 2010, individuals were not required to have health insurance. As of January 1, 2014, individuals and self-employed taxpayers now have a healthcare requirement. The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another as a dependent for federal tax purposes is responsible for making the payment if the dependent does not have coverage and does qualify for an exemption.

Individuals  

• Obtain minimum essential coverage beginning in 2014 for themselves and their dependents, qualify for one or more exemptions from coverage, or be subject to penalty when you file your 2014 individual tax return.
• Purchase health insurance from the federal or state exchange which may result in a premium assistance credit.
• Consider applying for a penalty exemption with HHS before the end of the year.

In April 2014, the White House released the following Fact Sheet claiming the ACA is working by giving millions of Americans healthcare security and slowing the growth of health care costs. The press release included the following facts:

• 3 million young adults gained coverage thanks to the ACA by being able to stay on their parents plan.
• 3 million more people were enrolled in Medicaid and CHIP as of February, compared to before the Marketplaces opened.
• Health care costs are growing at the slowest level on record: Lower-than-expected premiums under the ACA will help save $104 billion over the next ten years. Medicare /Medicaid costs in 2020 are now projected to be $180 billion lower than 2010 estimates. In 2016, the average premium for the second-lowest cost silver Marketplace plan will be 15% lower than expected.
• Up to 129 million Americans with pre-existing conditions – including up to 17 million children – no longer have to worry about being denied health coverage or charged higher premiums because of their health status.
• In 2013, 37 million people with Medicare received at least one preventative service at no out of pocket cost.
• Since the health care law was enacted, almost 8 million seniors have saved nearly $10 billion on prescription drugs as the health care law closes Medicare’s “donut hole.”

105 million Americans no longer have to worry about having their health benefits cut off after they reach lifetime limit.

Large Employer Taxes for Health Insurance Plans  

“No Offer” Penalty 

For 2015, large employers with 100 or more employees are subject to a shared responsibility penalty for failure to offer health insurance to at least 70% of their full-time employees, and any employee obtains coverage on a state exchange and receives a premium tax credit or cost-sharing reduction. Beginning in 2016, the requirement extends to large employers with 50 or more employees that fail to offer coverage to 95% of their full-time employees. This penalty is calculated monthly at $167 (1/12 of $2,000) for each month of failure, multiplied by the number of full-time employees greater than 30.

“Inadequate Offer” Penalty 

Large employers (as defined under “No Offer” Penalty above) that fail to offer affordable and/or minimum value coverage are also subject to a penalty calculated monthly at $250 (1/12 of $3,000) for each month of failure for each employee that obtains health insurance on a state exchanges and receives a premium tax credit or cost-sharing reduction. This penalty cannot be greater than the “No Offer” Penalty.

“Dumping” Penalty 

Many employers had thought they could shift health costs to the government by “dumping” their employees to the exchange with a tax free contribution of cash to their employees to help cover the costs of insurance. The Obama Administration does not allow for such arrangements and stated the following:

Large employers with 50 or more employees, who terminate their health insurance plans, are subject to a (penalty) tax of $100 per day for each employee to whom such failure relates. The tax ranges from a minimum of $2,500 up to $500,000, but not to exceed 10% of the amount paid by the employer during the preceding year for group health insurance plans.

• The tax will continue until the noncompliance is corrected.
• No tax will be due if the failure is corrected within 30 days of the first person otherwise liable for the tax knew, or exercising reasonable diligence would have known, that the failure existed.
• The penalty does not apply to church plans.
• The “No Offer” and “Inadequate Offer” penalties also apply.

For more information, contact Padgett Business Services in Bothell, Washington at (425) 408-1695. We handle your bookkeeping, accounting, tax (personal & business) and payroll needs – so you can focus on what makes you money. Serving Bothell, Lynnwood, Kenmore, Mill Creek and surrounding areas.

Beginning in 2013 the new Unearned Income Medicare Contribution (UIMC) tax takes effect and could affect your tax liability.  Because of the types of income subject to this new tax, it is commonly referred to as the Net Investment Income Tax (NIIT).  The new 3.8% tax is applied to the lesser of:

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