The IRS announced inflation adjustments for 2014.  These inflation adjustments are for more than 40 tax provisions.  Some of the provisions include the following:

• The standard deduction rises to $6,200 for singles and married persons filing separate, $12,400 for married filing jointly and $9,100 for heads of households, for tax year 2013.
• Tax rate of 39.6% affects singles with income exceeding $406,750 and $457,600 for married filing jointly.
• The personal exemption will rise to $3,950.  The exemption is subject to a phase-out with adjusted gross incomes of $254,200 for singles and $305,050 for married filing jointly.  It will phase-out completely at $376,700 for singles and $427,550 for married filing jointly.
• On tax year 2014 returns, the limitation for itemized deductions claimed for individuals begins with incomes of $254,200 or more and $305,050 for married filing jointly.

 Information on these and other tax provisions can be found at:

http://www.irs.gov/uac/Newsroom/In-2014,-Various-Tax-Benefits-Increase-Due-to-Inflation-Adjustments

If you have any questions regarding this information, please contact us here at Edmondson, Betzler & Montgomery, PLLC.

Will the credit make a difference for you?

For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

For tax years beginning in 2014 or later, there will be changes to the credit:

The maximum credit will increase to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.

• To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.
• The credit will be available to eligible employers for two consecutive taxable years.

As an example, if you pay $50,000 a year toward workers’ health care premiums — and if you qualify for a 15 percent credit, you save… $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $10,000 a year.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

Can you claim the credit?

Now that you know how the credit can make a difference for your business, can you claim it?
To claim it, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 per year.  This figure will be adjusted for inflation beginning in 2014.  You will have to purchase insurance through the SHOP Marketplace to be eligible for the credit for tax years 2014 and beyond.

For more on the Small Business Health Care Tax Credit visit http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers.

Temporary Reg. §1.263(a)-1T, below was removed by T.D. 9636, but a taxpayer may choose to apply Temporary Reg. §1.263(a)-1T to tax years beginning on or after January 1, 2012, and before January 1, 2014.

(a) General rule for capital expenditures. – Except as provided in chapter 1 of the Internal Revenue Code, no deduction is allowed for:

1. Any amount paid for new buildings or for permanent improvements or betterments made to increase the value of any property or estate; or
2. Any amount paid in restoring property or in making good the exhaustion thereof for which an allowance is or has been made.

The Internal Revenue Service is warning consumers about a sophisticated phone scam targeting taxpayers, throughout the country.

Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

“This scam has hit taxpayers in nearly every state in the country. We want to educate taxpayers so they can help protect themselves. Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail

Other characteristics of this scam include:

• Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
• Scammers may be able to recite the last four digits of a victim’s Social Security Number.
• Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
• Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
• Victims hear background noise of other calls being conducted to mimic a call site.
• After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

More information is available on the IRS website, irs.gov.