July, 2013

Patient Protection and Affordable Care Act—does it apply to your company?

PPACA, also known as “Obamacare” has different rules depending on your company size.

There are two classes: “Large” and “Small.” Large employers have more than fifty full-time employees for Full Time Equivalents (FTEs) on average for the previous year.

Owners, partners, greater than 2% shareholders and their family do not count.

If you are a small employer, there is potentially a tax credit available through the end of this year if you’re voluntarily providing health care insurance for your employees. BUT, the owners don’t count for the credit, family of owners don’t count, and average annual wage has to be less than $50,000 per FTE. I ran some calculations for a couple of my clients last year, and no one qualified, and it just made me cranky to have spent several hours calculating for no benefit. (I suppose the benefit is that we know for sure there is no credit available.) I hold little hope for most of my clients. (The cost of living is generally too high in the Bay Area, or my clients just pay too much in payroll!) Oh, and if you were eligible for the credit, the amount of the credit is also reduced by 8.7% due to sequestration.

This Act is also the one that put in the extra 0.9 Medicare Tax on wage and self-employment income for individuals with income higher than $200,000 or married filing jointly couples with incomes higher than $250,000. If you’re paying someone more than $200k, your payroll service or software should do this calculation correctly. If both spouses make $199k, they’ll have an extra tax to pay on the joint return (MFS is $125k each—so no magic relief is available by filing separately).

For more information, try http://www.irs.gov/taxtopics/tc763.html

Itemized Deduction of Medical Expenses for 2013: 10%

Not everyone who files an individual tax return itemizes deductions on their Form1040. There is a standard deduction set each year ($6,100 Single, $12,200 MFJ for 2013), and you generally take either itemizing or standard deduction, whichever is greater, and you get to decide each year (generally).

The kinds of expenses that get itemized include such things as mortgage interest, property tax, charitable donations, etc. One of the calculated deductions is medical expenses, including health insurance, provided you don’t take the self employed health insurance deduction elsewhere on the return (which is generally a better deal for those who qualify). The medical expenses that are deducted in order to calculate the total itemized deductions is limited—I guess the thinking is that everyone has SOME medical expenses, and it’s only when you’ve got lots of medical expenses that you can start to deduct them from your taxable income. What’s “lots?” it’s defined by a percentage of your adjusted gross income. For many years prior to 2013, we’ve used 7.5% of AGI as the floor. If you have more medical expenses than 7.5% of your AGI, the overage starts to count towards itemized deductions. Well, starting in 2013, the floor is 10% of AGI. That’s what’s new.

For example, if your AGI is $100,000, you have to have more than $10,000 of medical expenses to start counting medical expenses towards an itemized deduction total—to see if your itemized deductions are more than the standard deduction. So you’d need medical expenses of $16,101 to have $1 more than the standard deduction as a single person, if you had no other itemized deductions.

Confused? If you have a lot of medical expenses, let me know. If you’re not sure, let me know how much you’ve spend on medical expenses, and medical insurance (including long term care) separately.

Some medical expenses are NOT deductible. If you have over the counter drugs or homeopathic remedies, they are generally not deductible. If you buy drugs from Canada or Mexico without a prescription (because they’re cheaper), they’re generally not deducible. The massage may make you feel more healthy, but generally is not deductible. Get an MD to write you a prescription, and generally, it IS deductible.

For more information, see http://www.irs.gov/Individuals/2013-changes-to-itemized-deduction-for-medical-expenses.

Classes – IRS Education Provider, Basic Payroll, Schedule C

Here’s a link to the seminars page on my website: www.taxbuddha.com/seminars.html

I’m an official Education Provider. You can find my name (Tax Buddha) listed at the IRS website: https://ssl.kinsail.com/partners/irs/publicListing.asp where you’ll see I’m qualified to provide federal tax update and federal tax classes for EA’s and RTRP’s. (I just knew I should have used the name AAAAA Tax Buddha!)

Basic Payroll
In conjunction with the IRS and EDD, I’m going to be doing some Basic Payroll seminars coming up in the near future.

Basic Payroll Seminar runs 9 am ­ 3 pm with an hour for lunch

The next seminar will be:

San Francisco at the SBA office 455 Market Street, 6th floor (I take BART to Embarcadero or Montgomery Street)
Tuesday, July 2, 9:00 am – 3:00 pm
Wednesday, September 11, 9:00 am – 3:00 pm

Register by going to http://www.edd.ca.gov/Payroll_Tax_Seminars/ and find your favorite location.

These seminars have proven to be very popular for business owners and bookkeepers, plus they’re free.

How to Prepare your Own Schedule C
Get ready for next year and filing your own Schedule C for last year. Review what the IRS wants to know from you and how to report it for your business. This is a class for business owners who need a basic understanding of their 1040 Schedule C tax forms. We’ll also talk about what to do with the numbers once you have them. We can’t guarantee you won’t get audited, but this class will make it less likely.

I will be at the US SBA office in San Francisco at 455 Market Street, 6th Floor.
Tuesday, July 16, 6:00 pm – 8:30 pm
Tuesday, October 8, 6:00 pm – 8:30 pm

The Eightfold Path to Pay Less Tax and Avoid an Audit

Eight basic things business owners want to know printed in a booklet in “executive summary” form. This is ten years of working with the IRS Tax Code distilled down so it doesn’t take YOU ten years.

Just another way we’re trying to simplify your life. And the purchase is tax deductible!

You can order from Amazon.com. Here’s the link to Amazon: http://www.amazon.com/Eightfold-Path-Less-Avoid-Audit/dp/0615233422/ref=sr_1_22?ie=UTF8&s=books&qid=1226611038&sr=1-22 

The booklet also contains sections on how returns are selected for audit, when to seek professional help, and how long to keep your tax records.

Little Box of Inc: Incorporations Made Easy published on Kindle

The book with tips about how the S Corporation works is now published to Amazon’s Kindle, updated with additional information about S Corporations, and can be found by searching for Andrew S Rogers as author, and click on “Kindle.” Here’s the blurb:

Considering incorporating as an S Corporation? This booklet will help you understand how the S Corporation works, what you need to do to become incorporated and what you need to do once you have a corporation to stay out of trouble. The structure and the requirements are reviewed, as well as helpful tips to use your corporation to reduce your tax liability and retain your status as an S Corporation. I’ve worked with S Corporations for many years, and as a tax preparer, I can choose the kind of entity I have for my business: I choose the S Corporation myself, and I’ve convinced many of my fellow tax preparers to incorporate as well. I’ve divided the information into clear, easy-to-understand topics, and cross-referenced sections when it might be helpful.

After you’ve read this material, you can view on-line videos via YouTube.com for free to access more advanced information about S Corporations. You may also be interested in my “Choice of Entity” class – see below.


Tax Buddha Messenger Bags

Want to be the first person in your tax bracket to sport the fabulous Tax Buddha Messenger Bag? I’ve now got a “shop” on Café Press at www.cafepress.com/TaxBuddha in case you’d like to order your own Tax Buddha logo items. The messenger bag came out particularly well, not quite “saffron,” but easy to find in an airport.

Phone and Fax Numbers

Our northern California occasional in Alameda:
1516 Oak Street, Suite 109
Alameda CA 94501
Phone numbers are:
Phone (510) 332-0401
Fax (925) 478-2726

“You too can be enlightened about tax” — Tax Buddha