Marriage Tax Tips

Credit Score Ingredients

If you recently got married, plan to get married, or know someone taking the matrimonial plunge, here are some important tax tips every new bride and groom should know.

 

 

 

 

 

1 Notify Social Security. Notify the Social Security Administration (SSA) of any name changes by filling out Form SS-5. The IRS matches names with the SSA and may reject your joint tax return if the names don’t match what the SSA has on file.
1 Address change notification. If either of you are moving, update your address with your employer as well as the Postal Service. This will ensure your W-2s are correctly stated and delivered to you at the end of the year. You will also need to update the IRS with your new address using Form 8822.
1 Review your benefits. Getting married allows you to make mid-year changes to employer benefit plans. Take the time to review health, dental, auto, and home insurance plans and update your coverage. If both of you have employer health plans, you need to decide whether it makes sense for each of you to keep your plans or whether it’s better for one to join the other’s plan as a spouse. Pay special attention to the tax implication of changes in health savings accounts, dependent childcare benefits and other employer pre-tax benefits.
1 Update your withholdings. You will need to recalculate your payroll withholdings and file new W-4s reflecting your new status. If both of you work, your combined income could put you in a higher tax bracket. This can result in reduced and phased-out benefits. This phenomenon is known as the “marriage penalty.”
1 Update beneficiaries and other legal documents. Review your legal documents to make sure the names and addresses reflect your new marital status. This includes bank accounts, credit cards, property titles, insurance policies and living wills. Even more importantly, review and update beneficiaries on each of your retirement savings accounts and pensions.
1 Understand the tax impact of your residence. If you are selling one or two residences, review how capital gains tax laws apply to your situation. This is especially important if one of you has been in your home for only a short time or if either home has appreciated in value. This review should be done prior to getting married to maximize your tax benefits.
1 Sit down with an expert. It is natural for newlyweds to focus their attention on the big day. There are so many decisions to be made from selecting a venue to planning the honeymoon. Because of this, reviewing your tax situation often is an afterthought. Do not make this mistake. A simple tax and financial planning session prior to the big day can save on future headaches and avoid potentially expensive tax mistakes.

If you’d like a review of how marriage will affect your tax and financial situation, call at your earliest opportunity.

 

 

2017 Health Savings Account Limits Announced

Stethescope around hunderd dollar bills

The savings limits for the ever-popular Health Savings Accounts (HSA) are now set for 2017. The new limits are outlined here with current year amounts noted for comparison purposes.

What is an HSA?

An HSA is a tax-advantaged savings account to pay for qualified health care costs for you, your spouse, and your dependents. When contributions are made through an employer, they are made on a pre-tax basis. There is no tax on the withdrawn funds, the interest earned, or investment gains as long as the funds are used to pay for qualified medical, dental, and vision expenses. Unused funds may be carried over from one year to the next. To qualify for this tax-advantaged account you must be enrolled in a “high deductible” health insurance program as defined by HSA rules.

The limits

Health Savings Account (HSA) Limits NEW! 2017 2016 Change
Maximum Annual Contribution Self $3,400 $3,350 +$50
Family $6,750 $6,750 nc
Add: 55+ catch up
contribution
$1,000 $1,000 nc
Health Insurance Requirements
Minimum Deductible Self coverage $1,300 $1,300 nc
Family coverage $2,600 $2,600 nc
Out-of-pocket Maximum Self coverage $6,550 $6,550 nc
Family coverage $13,100 $13,100 nc

Source: IRS Rev Proc 2016-28

Note: To qualify for an HSA you must have a qualified High Deductible Health Plan (HDHP). A plan must meet minimum deductible requirements that are typically higher than traditional health insurance. In addition, your coverage must have reasonable out-of-pocket payment limits as set by the above noted maximums.

Not sure what an HSA is all about? Check with your employer. If they offer this option in their health care benefits, they will have information discussing the program and its potential benefits.

 

 

ACA Strikes Again

Are you prepared?

The Affordable Care Act (ACA) continues to evolve as the IRS begins to address challenges faced during the past tax season. A recent IRS announcement warns taxpayers who use the Premium Tax Credit to file their 2014 tax return immediately. Failing to do so may cause the IRS to deny using the Premium Care credit during 2016. Here is what you need to know.

Who? Anyone who uses the Marketplace to purchase their health insurance and receives the Premium Tax Credit. The IRS announcement applies to;

Affordable Care Act Premium Tax Credit

Advanced Premium Tax Credit Users

This IRS warning impacts anyone who has their Premium Tax Credit paid directly to their health insurance provider to help lower their monthly health insurance premium payments. And…

No 2014 Tax Return on File

notice specifically impacts those who use the tax credit and have not filed a 2014 tax return.

What happens. If you are impacted by this announcement you will no longer be eligible to receive pre-payment of the Premium Tax Credit in 2016. You will need to come up with the money to pay for your entire health insurance premium each month.

Action to take. If you do not want this to impact you, file your 2014 tax return as soon as possible. File now even if you filed a tax extension giving you until October 15, 2015 to file your tax return.

To learn more please review IRS Health Care Announcement: IRS 2015-40

New Level of Shared Responsibility Penalty

Don’t let this one get out of hand

UninsuredA part of the Affordable Care Act is the enactment of a tax penalty if you or your family does not have qualified health insurance coverage for the entire year. The new tax penalty, called the “shared responsibility payment” impacts taxpayers beginning in 2014. While the payment may have been manageable in 2014, it is going up quite a bit in 2015. Here is what you need to know.

Shared Responsibility Payment Calculation

greater of
2014 NEW! 2015 Change
Flat Fee
(or)
$95.00 per adult
$47.50 per child
$285 maximum flat fee
$325.00 per adult
$162.50 per child
$975 maximum flat fee
+$230 per adult
+$115 per child
+$690 maximum flat fee
Cap Fee 1% of your yearly household income capped at the cost of the national average premium of the bronze level health plans available through the marketplace.* 2% of your yearly household income capped at the cost of the national average premium of the bronze level health plans available through the marketplace.* * Average premiums vary by state. No one knows what the new average will be, but it is expected to go up a minimum of 6%.

Note: If premiums are more than 8% of household income or the gap in coverage is less than three consecutive months or there is an approved hardship then the shared responsibility payment could be reduced.

Action to take

Arrow Get coverage. If you are currently uninsured, each month you delay in getting coverage increases the amount of the penalty you will be required to pay.
Arrow Plan for the penalty. If you know the penalty is coming, save money to make this payment when you file your tax return.
Arrow Shop around. Check with your employer and/or state agencies to see about available coverage. There are often programs and assistance available to make getting health care more affordable for most of us.

Alert. 800,000 Form 1095-A Errors

1095-A Form┬áIn late February, the Government announced that 800,000 of the Form 1095-A’s they sent to taxpayers who used Healthcare.gov to purchase their health insurance in 2014 have errors in them. If you are impacted, you will receive an announcement of the error. You can also check to see if your form is wrong by logging into your Healthcare.gov account.

If you already filed your tax return, the Treasury Department is not requiring you to file an amended return. The corrected forms are being sent out in March, so you may need to wait for receipt of this form to file your taxes. Here is a link to the original announcement. Announcement: Form 1095-A Error

When to Notify the Healthcare Marketplace

When to Notify the Healthcare MarketplaceAvoid a Premium Tax Credit bill at the end of 2014

For the millions who now use the Healthcare Marketplace to purchase their health insurance, it is important to keep your information with them up to date. Not only does this help ensure you have the proper health insurance coverage, but it also ensures your healthcare Premium Tax Credit is properly applied.

Per the IRS, here is a list of changes in circumstance that can impact the value of your Premium Tax Credit amount:
Bullet warning getting married,
Bullet warning the birth or adoption of a child,
Bullet warning divorce,
Bullet warning getting a new job,
Bullet warning losing a job,
Bullet warning moving,
Bullet warning changes in eligibility for employer or government sponsored health care coverage,
Bullet warning ANYTHING that impacts family size or composition,
Bullet warning ANYTHING that impacts your family income.

2015 Health Care Savings (HSA) Account Limits Announced

2015 Health Care Savings (HSA) Account Limits AnnouncedThe savings limits for the ever-popular Health Savings Accounts (HSA) are now set for 2015. The new limits are outlined here with current year amounts noted for comparison purposes.

What is an HSA?

An HSA is a tax advantaged savings account to pay for qualified health care costs. The account consists of wages contributed on a pre-tax basis. There is no tax on the funds contributed or investment earnings as long as the funds are used to pay for qualified medical, dental and vision expenses. To qualify for this tax-advantaged account you must be enrolled in a “high deductible” health insurance program as defined by HSA rules.

The limits

Health Savings Account (HSA) Limits 2014 NEW! 2015 Change
Maximum Annual Contribution Self $3,300 $3,350 +$50
Family $6,550 $6,650 +$100
Add: 55+ catch up
contribution
$1,000 $1,000 nc
Health Insurance Requirements
Minimum Deductible Self coverage $1,250 $1,300 +$50
Family coverage $2,500 $2,600 +$100
Out-of-pocket Maximum Self coverage $6,350 $6,450 +$100
Family coverage $12,700 $12,900 +$200

Note: HSAs require a qualified High Deductible Health Plan (HDHP). To qualify, a health insurance plan must meet minimum deductible requirements that are typically higher than traditional health insurance. In addition, your coverage must have reasonable out-of-pocket payment limits as set by the above noted maximums.

Not sure what an HSA is all about? Check with your employer. If they offer this option in their health care benefits, they will have information discussing the program and its potential tax benefits.

Health Insurance Penalty Starts Now!

Time to be thinking about health insurance

Health InsuranceThe health care legislation commonly known as Obamacare has many provisions that are being implemented over a number of years. As we start 2014, those that currently have no health insurance could be facing a tax penalty.

Beginning in January, 2014, everyone will be required to have health insurance or face a potential penalty. The initial penalty will be $95 per individual, $285 per family or 1% of your income whichever is greater. There is also a potential penalty assessed on employers who fail to offer employees health care insurance.

What is not known, is whether there will be some penalty grace period due to all the sign up problems with the government’s web site. If you are uninsured, your best defense is to review your health insurance options and register for an appropriate health insurance policy as soon as possible.

Health Insurance Details

Detail 1 Every state is required to have an insurance exchange. This exchange is a web site where everyone can view health insurance options. Unfortunately, this is the area of Obamacare that has seen a lot of negative press due to system problems.
Detail 2 No pre-existing condition limitation. You are no longer to be refused insurance because of a pre-existing condition or be charged an incremental premium based on health or gender.
Detail 3 Buy or pay the penalty? Hopefully, not many will be faced with this dilemma. Part of the health insurance bill is the requirement for most small businesses to offer a qualified plan or face a penalty billed to their business.
Detail 4 Will I be penalized? There are exceptions to the penalty if you have to spend more than 8% of your household income on the cheapest health care insurance premiums. There are also subsidies if you cannot afford health care insurance. This is in the form of a health insurance premium tax credit if your household income is between 100 and 400 percent of the federal poverty level.

If you do not have health insurance start looking now. With proper planning you should be able to avoid the unpleasant task of facing a tax penalty at the end of 2014.

As always, should you have any questions or concerns regarding your situation please feel free to call.

Understand the New Health FSA Limits

401K fee disclosures delayedMillions of Americans take advantage of their employer’s cafeteria plan that allows setting aside pre-tax dollars to be used to pay for qualified health care expenses. The problem with these plans has always been that if you do not use the funds in the account by the end of the year they are forfeited. Some employers have established an allowable “grace period rule” that gives an additional two months and 15 days to use the funds before they are forfeited.

New rules

The maximum annual amount that can be set-aside in Health FSA’s is now set at $2,500 (indexed to inflation after 2012). Old rules allowed this account level to be set by employers offering the benefit (usually $5,000). By reducing funds available for this benefit, the government is hoping it will help pay for the new health care law. With this law change, the IRS agreed to reconsider the long-standing “use it or lose it” rules within FSA’s.

Effective in 2013, employers can opt to change their Health FSA plans to allow up to $500 in unused funds to be carried over into the following year. If an employer opts to do this, they need to forgo any allowable grace period rules currently within their FSA plan.

What you need to know

Check Don’t assume you can carry over $500. With all the press around this rule change, many run the risk of assuming you don’t have to spend all your Health FSA funds by the end of the year. Remember, your employer must first make the rule change in their FSA plan before you can carry over unspent funds.
Check Look for a notice. Ask your employer’s human resource department what the company’s plan is with the new rule. You will need to plan for next year’s withholding based on their answer.
Check Contributions and spending must match. Just because you carry over $500 into next year, do not assume you can ask for expense reimbursements over the $2,500 limit during any one year. You cannot. So if you carry over funds, you may need to reduce your contribution into your FSA the next year.
Check A Health Savings Account (HSA) is usually a better option. Don’t confuse the Health FSA with the HSA benefit. If you are in a qualified high deductible health insurance plan, you may also be an active participant in an HSA. This pre-tax savings account can be used to pay for qualified medical expenses AND unused funds can be carried over into future years. As long as the funds are used for qualified expenses, there is no tax obligation. This type of savings account is usually preferential over the Health Care FSA option.

Sound confusing? It can be. Until you receive definitive word your employer is changing their plan, it is best to use up your FSA funds prior to the end of your plan year.

Beyond the Noise of Health Care Initiatives

A dozen tax planning triggersTax provisions for individuals and families impacted by the Affordable Care Act (also known as Obamacare) will be upon us in 2014. We are seeing the approach of Obamacare in many forms; by Congress members filibustering, through nightly news reports, constant advertisements, and announcements of businesses migrating away from offering health care insurance for some of their employee groups. How does someone make sense out of all this?What is happening now

From October 2013 thru March 2014, the open enrollment phase to obtain health insurance through the Health Insurance Marketplace begins. This Insurance Marketplace is a legal requirement for each state to publish health insurance options and related costs to all residents in their respective state. So please be prepared to be inundated with commercials from each state promoting their new Health Insurance Marketplace and the need for you to review your health coverage. Remember, unless something changes, those who do not have health insurance in 2014 could face additional federal tax in 2014.

What you need to know

Check Employer-provided insurance. If you currently have health insurance through your employer, the current media storm will, in all likelihood, not apply to you.
Check Sole-proprietors. If you are a sole-proprietor you may wish to review your current insurance coverage with the policies available in the Health Insurance Marketplace.
Check Currently without health insurance. If you do not have health insurance, pay attention. Not only will the Marketplace be a good resource to shop for a health insurance policy, your income may also qualify you for a federal Premium Tax Credit to lower your health insurance cost.

If you wish to learn more and determine the best course of action for you and your family visit www.healthcare.gov.

As always, should you have any questions or concerns regarding your situation please feel free to call.