CERTIFIED PUBLIC ACCOUNTANTS

Serving clients throughout New York and New Jersey 201-909-0090

News and Events

Friday
Jan032014

2014 Minimum Wage Rate Changes

On January 1, 2014 the minimum wage in New Jersey increased to $8.25 per hour and in New York to $8.00 per hour.  If you are a New Jersey or New York employer, please be sure to make the appropriate changes to any employees on your payroll who currently make less than the new minimum wage rate.

On January 1, 2014 the minimum wage will also increase in 10 additional states. 

STATE / NEW MINIMUM WAGE

Arizona $7.90

Colorado $8.00

Florida $7.93

Missouri $7.50

Montana $7.90

Ohio $7.95

Oregon $9.10

Rhode Island $8.00

Vermont $8.73

Washington $9.32



   

 

Wednesday
Jul102013

Health Care Reform Update July 2013

EMPLOYERS OF SELF-FUNDED HRA'S - HEALTH REIMBURSEMENT ACCOUNTS - RESPONSIBLE FOR PAYING THE PCORI FEE ON BEHALF OF THE SELF FUNDED HRA.  

This requirement has not been delayed with the Employer Mandate to provide coverage (discussed below).

The Patient Protection and Affordable Care Act impose a new PCORI (Patient-Centered Outcomes Research Institute) fee on plan sponsors and issuers of certain individual and group policies. The first year fee is $1 per covered life; the second year is $2 per covered life and then is indexed to national health expenditures thereafter until it ends in 2019.

Only those employers with an HRA plan running in any of the below plan year examples will owe $1 per covered employee by July 31st, 2013.   Employers with an HRA effective date after the below plan years will not owe the fee until July 31, 2014.

  • November 1, 2011 through October 31, 2012
  • December 1, 2011 through November 30, 2012
  • January 1, 2012 through December 31, 2012

Under the IRS rules, insurers and plan sponsors are responsible for paying the fee, which is treated as an excise tax.  A federal excise tax return, Form 720, must be filed by July 31st of the calendar year immediately following the last day of the plan year.

While Form 720 does not need to be filed electronically, the payment should be made through the EFTPS system. 

If you have an administrator for your plan, please contact them for the information you will require to file the form.  If you do not have a plan administer, you will need to complete the form yourself.
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WHITE HOUSE DELAYS MAJOR HEALTH CARE REFORM MANDATE UNTIL 2015

The Obama Administration announced recently that it would delay enforcement of the employer mandate under the Affordable Care Act (ACA) until 2015. The employer mandate requires employers with 50 or more full-time employees to offer health insurance to their employees or pay a penalty of $2,000 per worker. The purpose of the employer mandate was to discourage employers from dropping employee coverage and leaving employees to buy subsidized insurance in the ACA exchanges at greater taxpayer expense.

If we can be of any further assistance, please contact our office at 201-909-0090. 

 

Monday
Sep102012

Deadline Reminders

The pending September 15, 2012 deadline includes final extended deadlines for corporations, limited liability companies, partnerships and trusts. It also includes 3rd quarter estimated tax payments for corporations, individuals and trusts. A reminder that the final extended deadline for individuals is October 15, 2012.

Contact us with any questions: 201-909-0090

Tuesday
Sep042012

Be Charitable

Just a reminder to consider non-cash charitable contributions as a good way to do something great for a charity, get a tax deduction and clear some things from the house/garage. It is important to be able to substantiate what was donated, please visit the IRS website to learn more about what the IRS requires.

Tuesday
Aug282012

Planning for the 3.8 Percent Medicare Tax on Investment Income

The health care reform package (the Patient Protection and Affordable Care Act and the Health Care and education Reconciliation Act of 2010) imposes a new 3.8 Medicare contribution tax on the investment income of higher-income individuals. Although the tax does not take effect until 2013, it is not too soon to examine methods to lessen the impact of the tax.

Net investment income. Net investment income, for purposes of the new 3.8 percent Medicare tax, includes interest, dividends, annuities, royalties and rents and other gross income attributable to a passive activity. Gains from the sale of property that is not used in an active business and income from the investment of working capital are treated as investment income as well. However, the tax does not apply to non taxable income, such as tax-exempt interest or veterans' benefits. Further, an individual's capital gains income will be subject to the tax. This includes gain from the sale of a principal residence, unless the gain is excluded from income under Code Sec. 121, and gains from the sale of a vacation home. However, contemplated sales made before 2013 would avoid the tax. 

The tax applies to estates and trusts, on the lesser of undistributed net income or the excess of the trust/estate adjusted gross income (AGI) over the threshold amount ($11,200) for the highest tax bracket for trusts and estates, and to investment income they distribute. 

Deductions. Net investment income for purposes of the new 3.8 percent tax is gross income or net gain, reduced by deductions that are "properly allocable" to the income or gain. This is a key term that the Treasury Department expects to address in guidance, and which we will update you on developments. For passively-managed real property, allocable expenses will still include depreciation and operating expenses. Indirect expenses such as tax preparation fees may also qualify.

For capital gain property, this formula puts a premium on keeping tabs on amounts that increase your properties basis. It also puts the focus on investment expenses that may reduce net gains: interest on loans to purchase investments, investment counsel and advice, and fees to collect income. Other costs, such as brokers' fees, may increase basis or reduce the amount realized from an investment. As such, you may want to consider avoiding installment sales with net capital gains (and interest) running past 2012.

Thresholds and impact. The tax applies to the lesser of net investment income or modified AGI above $200,000 for individuals and heads of household, $250,000 for joint filers and surviving spouses, and $125,000 for married filing separately. MAGI is AGI increased by foreign earned income otherwise excluded under Code Sec. 911; MAGI is the same as AGI for someone who does not work overseas.

Example. Jim, a single individual, has modified AGI of $220,000 and net investment income of $40,000. The tax applies to the lesser of (i) net investment income ($40,000) or (ii) modified AGI ($220,000) over the threshold amount for an individual ($200,000), or $20,000. The tax is 3.8 percent of $20,000, or $760. In this case, the tax is not applied to the entire $40,000 of investment income.

The tax can have a substantial impact if you have income above the specified thresholds. Also, don't forget that, in addition to the tax on investment income, you may also face other tax increases proposed by the Obama administration that could take effect in 2013. The top two marginal income tax rates on individuals would rise from 33 and 35 percent to 36 and 39.6 percent, respectively. The maximum tax rate on long-term capital gains would increase from 15 percent to 20 percent. Moreover, dividends, which are currently capped at the 15 percent long-term capital gain rate, would be taxed as ordinary income. Thus, the cumulative rate on capital gains would increase to 23.8 percent in 2013, and the rate on dividends would jump to as much as 43.4 percent. Moreover, the thresholds are not indexed for inflation, so a greater number of taxpayers may be affected as time elapses. Congress may step in and change these rate increases, but the possibility of rates going up for upper income taxpayers is sufficiently real that tax planning must take them into account.

Exceptions. Certain items and taxpayers are not subject to the 3.8 percent tax. A significant exception applies to distributions from qualified plans, 401(k) plans, tax-sheltered annuities, individual retirement accounts (IRAs), and eligible 457 plans. At the present time, however, there is no exception for distributions from non qualified deferred compensation plans subject to Code Sec. 409A, although some experts claim that not carving out such an exception was a Congressional oversight that should be rectified by an amendment to the law before 2013.

The exception for distributions from retirement plans suggests that potentially taxed investors may want to shift wages and investments to retirement plans such as 401(k) plans, 403(b) annuities, and IRAs, or to 409B Roth accounts. Increasing contributions will reduce income and may help you stay below the applicable thresholds. Small business owners may want to set up retirement plans, especially 401(k) plans, if they have not yet established a plan, and should consider increasing their contributions to existing plans. 

Another exception covers income ordinarily derived from a trade or business that is not a passive activity under Code Sec. 469, such as a sole proprietorship. Investment income from an active trade or business is also excluded. However, SECA (Self-Employment Contributions Act) tax will still apply to proprietors and partners. Income from trading in financial instruments and commodities is also subject to the tax. The tax does not apply to income from the sale of an interest in a partnership or S corporation, to the extent that gain of the entity's property would be from an active trade or business. The tax also does not apply to business entities (such as corporations and limited liability companies), nonresident aliens (NRAs), charitable trusts that are tax-exempt, and charitable remainder trusts that are non taxable under Code Sec. 664.

Article provided by CCH.

Please contact our office if you would like to discuss the tax consequences to your investments; (201) 909-0090.