Donald DeHaven, CPA | DeHaven and Company, Inc. | 10945 State Bridge Rd. STE 401-449 | Alpharetta, GA, 30022 | 404-902-6121

       

 

 

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Do You Owe Sales Tax + Obamacare (A.C.A.) & You + Moving Affects Premium Tax Credits

 

One of the side effects of our last economic slowdown was in state government budgets; states searched hard for new income, and many of them found a great source by cracking down on sales tax collections. Their new hot buzzword: nexus.

Nexus means a connection that a business has with a state, and it has to do with a form of presence. In the sales tax world, you owe sales tax to a state if you have nexus in that state and you are selling taxable items. The scary part for small businesses is what makes up nexus.

A Small World

Globalization and technology together have produced dramatic shifts in the way businesses can look today. Not only can we access a pool of local talent to staff and grow our businesses, we can employ almost anyone around the world to work for us. Hiring dental practice employees or contractors located in other states can stretch our nexus to include that state.

As an example, if your practice is located in Chicago, Illinois and you hire someone that works from her home north in Wisconsin or south in Indiana, you might have nexus in Wisconsin or Indiana as well as Illinois, and you might owe sales tax in both places. Sales tax nexus is not the same as state income tax nexus, but the presence of a worker in another state is a possible trigger for sales tax nexus.

Taxable in One State, Not in Another

The taxability of services has grown rapidly as states look to balance their budgets after Federal cuts and other shortfalls. Not all services are taxed equally across states. Web design services are taxable in Texas, but not California, as one example.

Some states have smaller jurisdictions such as counties and municipalities, making for a total of 10,000 jurisdictions in the U.S., not just 50. Alabama, Colorado and Arizona, for example, have statewide rules as well as taxability rules for localities within the states.

Innocuous Survey Can Trigger Audit

You might receive a form that looks like a survey and asks innocent-looking questions such as how many employees do you have and what state do they work in. The surveys donít look like they are from a state government but they might be. Itís their way of getting you to admit nexus. Please do not let a worker fill these out; it could expose you to a huge liability.

Minimizing Sales Tax Audit Risk

Because of the high dollar impact on the profitability of your business, itís best to get a sales tax professional involved in helping you determine the taxability of your items as well as interpreting nexus. Many states are hiring auditors and aggressively pursuing businesses, so due diligence in this area is prudent.

If we can help in any way, please reach out and let me know
and feel free to call our offices at 404-902-6121.
 


 

The Affordable Care Act and You

 

The Patient Protection and Affordable Care Act of 2010 resulted in several changes to the U.S. tax code that affect individuals purchasing health care insurance through the health care exchanges. Let's take a closer look at what it all means for you.

Individual Shared Responsibility Payment

Starting January 2014, United States citizens and legal residents must obtain minimum essential health care coverage for themselves and their dependents, have an exemption from coverage, or make a payment when filing a 2014 tax return in 2015. The Individual Mandate is also known as the Individual Shared Responsibility Payment.

The payment varies and is based on income level. In 2014, the basic penalty for an individual (no dependents) is $95 or 1 percent of your yearly income (whichever is higher), with substantial increases in subsequent years. For example, in 2015, the penalty is $325 or approximately 2 percent of income, whichever is higher. In 2016, it increases to $695 or 2.5 percent of income (again, whichever is higher), indexed for inflation thereafter.

The individual shared responsibility payment is capped at the cost of the national average premium for the bronze level health plan available through the Health Insurance Marketplace in 2014. You will make the payment when you file your 2014 federal income tax return in 2015.

For example, a single adult under age 65 with household income less than $19,650 (but more than $10,150) would pay the $95 flat rate. However, a single adult under age 65 with household income greater than $19,650 would pay an annual payment based on the 1 percent rate.

For any month in 2014 that you or any of your dependents don't maintain coverage and don't qualify for an exemption, you will need to make an individual shared responsibility payment with your 2014 tax return filed in 2015.

However, if you went without coverage for less than three consecutive months during the year you may qualify for the short coverage gap exemption and will not have to make a payment for those months. If you have more than one short coverage gap during a year, the short coverage gap exemption only applies to the first.
 

Most people already have qualifying health care coverage and will not need to do anything more than maintain that coverage throughout 2014. Self-insured ERISA policies used by larger employers, as well as Medicare, Medicaid, and CHIP (Children's Health Insurance Program), and all of the health insurance plans offered by the exchanges, fall under the category of minimum essential health care coverage.

Qualifying coverage does not include coverage that may provide limited benefits, such as coverage only for vision care or dental care, workers' compensation, or coverage that only covers a specific disease or condition.

 

Note: Certain individuals are exempt from the tax and include: (1) people with religious objections; (2) American Indians with coverage through the Indian Health Service; (3) undocumented immigrants; (4) those without coverage for less than three months; (5) those serving prison sentences; (6) those for whom the lowest-cost plan option exceeds 8 percent of annual income; and (7) those with incomes below the tax filing threshold who do not file a tax return($10,000 for singles and $20,000 for couples under 65 in 2013).


A special hardship exemption applies to individuals who purchase their insurance through the Health Insurance Marketplace during the initial enrollment period for 2014 but due to the enrollment process have a coverage gap at the beginning of 2014.

Premium 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.

If you purchased coverage through the Health Insurance Marketplace (sometimes referred to as health care exchanges), you may be eligible for the premium tax credit. This refundable tax credit helps people with moderate incomes afford health insurance coverage they purchase through the exchange.

The premium tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes. To be eligible for the credit, you generally need to satisfy three rules.

First, you need to get your health insurance coverage through the Health Insurance Marketplace. The open enrollment period to purchase health insurance coverage for 2014 through the Health Insurance Marketplace runs from October 1, 2013 through March 31, 2014.

Second, you need to have household income between one and four times the federal poverty line. For a family of four for tax year 2014, that means income from $23,550 to $94,200.

Third, you can't be eligible for other coverage, such as Medicare, Medicaid, or sufficiently generous employer-sponsored coverage.

If you are eligible for the credit, you can choose to "get it now" by having some or all of the credit paid in advance. These payments go directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014. Or you "get it later" by waiting to get the credit when you file your 2014 tax return in 2015.

If you wait to get the credit, it will either increase your refund or lower your balance due. Your 2014 tax return will ask if you had insurance coverage or qualified for an exemption.

 

If not, you may owe a shared responsibility payment when you file in 2015.

If you choose to receive the credit in advance, changes in your income or family size will affect the credit that you are eligible to receive.

 

If the credit on your tax return you file in 2015 does not match the amount you have received in advance, you will have to repay any excess advance payment, or you may get a larger refund if you are entitled to more.

Reporting Changes

It is important to notify the Health Insurance Marketplace about changes in your income or family size as they happen during 2014 because these changes may affect your premium tax credit.

Changes in circumstances that you should report to the Health Insurance Marketplace include, but are not limited to:

 - an increase or decrease in your income
 - marriage or divorce
 - the birth or adoption of a child
 - starting a job with health insurance
 - gaining or losing your eligibility for other health care coverage
 - changing your residence
 

Reporting the changes will help you avoid getting too much or too little advance payment of the premium tax credit. Getting too much means you may owe additional money or get a smaller refund when you file your taxes. Getting too little could mean missing out on premium assistance to reduce your monthly premiums.

Repayments of excess premium assistance may be limited to an amount between $400 and $2,500 depending on your income and filing status. However, if advance payment of the premium tax credit was made but your income for the year turns out to be too high to receive the premium tax credit, you will have to repay all of the payments that were made on your behalf, with no limitation. Therefore, it is important that you report changes in circumstances that may have occurred since you signed up for your plan.

Changes in circumstances also may qualify you for a special enrollment period to change or get insurance through the Health Insurance Marketplace. In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances.

Remember you can call our offices if you have any questions about these or any other accounting, tax, financial planning or business planning related issues, at 404-902-6121

 


 

Moving Can Affect Your Premium Tax Credit

 

If you moved recently, youíve probably notified the U.S. Postal Service, utility companies, financial institutions and employers of your new address. If you get health insurance coverage through a Health Insurance Marketplace, the IRS reminds you about one more important notification to add to your list Ė the Marketplace.

If you are receiving advance payments of the premium tax credit, it is particularly important that you report changes in circumstances, including moving, to the Marketplace.

 

Thereís a simple reason. Reporting your move lets the Marketplace update the information used to determine your eligibility for a Marketplace plan, which may affect the appropriate amount of advance payments of the premium tax credit that the government sends to your health insurer on your behalf.

Reporting the changes will help you avoid having too much or not enough premium assistance paid to reduce your monthly health insurance premiums. Getting too much premium assistance means you may owe additional money or get a smaller refund when you file your taxes. On the other hand, getting too little could mean missing out on monthly premium assistance that you deserve.

Changes in circumstances that you should report to the Marketplace include, but are not limited to:

  - an increase or decrease in your income
  - marriage or divorce
  - the birth or adoption of a child
  - starting a job with health insurance
  - gaining or losing your eligibility for other health care coverage


Many of these changes in circumstances Ė including moving out of the area served by your current Marketplace plan Ė qualify you for a special enrollment period to change or get insurance through the Marketplace. In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances. You can find information about special enrollment periods at HealthCare.gov.

More Information

Find out more about the health care law, the premium tax credit and the individual shared responsibility provision at IRS.gov/aca

Find out more about the Health Insurance Marketplace at HealthCare.gov, or by calling (800) 318-2596.

 

If you have comments or questions on the information in these articles, as usual feel free to call our offices at 404-902-6121.

 


 

Remember you can call our offices if you have any questions about these or any other accounting, tax, financial planning or insurance related issues, at 404-902-6121. 

 

Regards, Don DeHaven, CPA

Principal DeHaven and Company, Inc.

 

Donald DeHaven, CPA | DeHaven and Company, Inc.

10945 State Bridge Rd. STE 401-449 | Alpharetta, GA, 30022 | 404-902-6121

email: dondehaven@usadentalcpa.com | Connect With Me on Linkedin

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