[fname], I have been made aware of several items that I want to make sure I pass along to you.

1) Inheritance or gifting of real estate in California

2) Misclassification of employees to independent contractors

3) Supreme Court ruling on Patient Protection Affordable Care Act

Let’s take inheritance or gifting of real estate in California. Although California has on the books a requirement to report a change in ownership in real estate to the California Board of Equalization not many people know this requirement exists and therefore changes in real estate ownership have not been reported in California, estimated 80+ of changes in ownership are unreported.

Well guess what, California is now serious about this reporting requirement and is assessing significant penalties for failure to report changes in ownership of California real estate.

It does not matter if the ownership is in an LLC, partnership or you inherit the property. If the property is just moving into a Family Living Trust no reporting is required. Why is California starting to assess these penalties you ask – reassessment of the value of the property for Real Estate Taxes in California. California wants more tax money.

The penalties for non-reporting are up to 10% of the new property tax value assessment. For example if the property is now valued at $1,000,000 and the tax on this is $12,000 the penalty is $1200 plus interest for each year the change was not reported. California is going back 6 years to find changes in title on California Real Estate and working with the IRS on gift tax returns filed but no change in ownership in California has been filed.

If you have inherited or gifted real estate in California you need to file the change in ownership form 100B with the California State Board of Equalization.

Now let’s discuss what is happening with the IRS and California regarding the misclassification of employees to Independent Contractors. Although proper classification of employees and Independent Contractors is not new what is new is the penalties on the employer for improperly classifying employees as independent contractors.

The IRS and California issued notices the beginning of 2012 that any employer who has Independent Contractor who is later determined to be an employee will be assessed with a $5,000 penalty a year for every misclassification.

If the associate dentist is incorporated it does not mean you are OK. You as the employer need to make sure you are following all the proper rules to protect the associate dentist as an Independent Contractor.  If you have any questions please call our office.

Last but not least, let’s discuss the US Supreme Court Ruling regarding the Patient Protection Affordable Care Act, PPACA. The US Supreme Court Ruled that the PPACA is substantially all constitutional.  (I'm hosting a Conference Call discussing this on Wed. July 11 @5:30 pm PT, click here to register if you have not done so already.)

The justices determined that it is not a mandate that everyone buy health insurance. The justices determined that individuals have the right not to buy health insurance. However, if an individual does not have health insurance that person is required to pay a “penalty” on their personal tax return for failure to have health insurance beginning in 2014.

The justices further determined that the “penalty” is not a penalty at all but a tax. Therefore since it is a tax the justices determined that Congress is completely able to enact taxes to change or encourage certain behaviors.

Also the justices determined that because this penalty is a tax it is too soon for any legal action to be taken about the appropriateness of the tax because no one will pay the tax until 2015 – the year the 2014 tax returns are filed and the tax is due.

Get ready for much higher insurance premiums and a lot more tax. With the ability of individuals with pre-existing conditions to get health insurance many companies selling health insurance now are leaving the market. Even though health insurance will be available to everyone there are no constraints in the law on the upper end of the price of the insurance.

If your business does not have 50 or more employees and you offer your employees health insurance will, you be subject to the same new rules on employers with 50 or more employees?

Several of the provisions of the PPACA include new Medicare Surtaxes on income over $200,000 single and $250,000 married of .9% and 3.8% Medicare Surtax on Interest, Dividends and Capital Gains beginning 2013.

There are many other hidden provisions of the PPACA that not many people know. For example there is a 2.3% additional tax on manufactures of medical devices. This 2.3% tax is now being passed on to dentist as well as doctors who buy new equipment beginning this year, 2012.

This is in addition to expiring tax provisions from the Bush era such as Capital Gains rates going up to 20% and in some cases 28%, the reduction of itemized deductions and personal exemption based upon income levels, as well as income tax bracket rates all going up all beginning 2013.

The lowest tax bracket – 10% - is gone. Therefore we all just got an immediate 5% increase in tax.

With this Supreme Court ruling and the expiring tax provisions we all need to accept this is where we are currently. With all these changes addressing your situation and exploring options is more important than ever.

I am putting aside a limited number of tax planning sessions. As my client you will receive a reduced planning fee for the session.

Give my office a call at (714) 619-0667 and set a planning meeting.   Monica


Monica Rebella, CPA/IAR
507 E. First Street #A
Tustin,CA 92780
ph (714) 619-0667
Fax (714) 544-0236
email: mrebella@rebellacpa.com

This document was not intended or written to be used, and it cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties.