Health Care Law Brings Changes to IRS Tax Forms

This year, there are some changes to tax forms related to the Affordable Care Act. Along with a few new lines on existing forms, there will also be two new forms that will need to be included with some tax returns. While most taxpayers will simply need to check a box on their tax return to indicate they had health coverage for all of 2014, there are also new lines on Forms 1040, 1040A, and 1040EZ related to the health care law.

To help navigate these changes, taxpayers and their tax professionals should consider filing their return electronically. Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math. There are a variety of electronic filing options, including IRSFree File for taxpayers who qualify, commercial software, and professional assistance.

Here is information about the new forms and updates to the existing forms:

Form 8965, Health Coverage Exemptions • Complete this form to report a Marketplace-granted coverage exemption or claim an IRS-granted coverage exemption on the return. • Use the worksheet in the Form 8965 Instructions to calculate the shared responsibility payment.

Form 8962, Premium Tax Credit • Complete this form to reconcile advance payments of the premium tax credit, and to claim this credit on the tax return.

Additionally, if individuals purchased coverage through the Health Insurance Marketplace, they should receive Form 1095-A, Health Insurance Marketplace Statement, which will help complete Form 8962.

For more information about your individual 2014 income tax return, please contact me at lancewgurel@gurelcpa.com

IN CASE YOU FORGOT ON JANUARY 1

The business mileage reimbursement rate is an optional standard mileage rate used in the United States for purposes of computing the allowable business deduction, for Federal income tax purposes under the Internal Revenue Code for the business use of a vehicle. Under the law, the taxpayer for each year is generally entitled to deduct either the actual expense amount, or an amount computed using the standard mileage rate, whichever is greater.

If you use your personal vehicle for business purposes and plan to use the Standard Mileage Rate, begin a good New Year's habit of keeping a mileage log to document your business use.

First step, RECORD THE BEGINNING OF THE YEAR MILEAGE. Yes, it's the 11th already, but better record today late, than not at all.

The Standard Mileage Rate for 2015 is 57.5 cents per mile for business use. (Charitable and moving rates do not change year-to-year.)

SUGGESTION: If you unsure whether you will have a large deduction using the Standard Mileage Rate or by deducting actual expenses, you can keep records, compare at the end of the year, and use whichever method gives the larger deduction.

WHO DO I NEED TO SEND A 1099-MISC TO?

Here is a two step process to decide if you need to issue a 1099-Misc to a vendor or subcontractor:

STEP 1: The payment or payments must total $600 or more during the year for services – not goods – in the course of your trade or business. You do NOT issue a 1099 for personal services. Trade or business only.

STEP 2: Generally, you do not issue 1099-Misc’s to S or C Corporations. You DO 1099s to LLC. Exception: you DO issue a 1099 for attorney fees, even if it is incorporated.

You must mail a copy of the 1099-Misc to the vendor/subcontractor by January 31, 2015, and send a copy to the IRS and Social Security by February 28, 2015.

These are the general guidelines; contact me for specific answers to your individual tax situation.

SIX THINGS YOU CAN DO NOW TO GET READY FOR TAX FILING

1. Make a list of places you expect to receive documents from. These include W-2s, interest and dividend statements, pension statements, mortgage lenders. If you don't receive these by the first week in February, contact them.

2. Have you moved recently? Be sure all those people in #1 know how to find you.

3. Do you need to issue a Form 1099-Misc to anyone? They should be mailed by January 31. Don't forget household and domestic workers, freelancers, etc.

4. Get proof of your health insurance coverage and that of your family members. Along with this, you will need to know the income of all members of the household in order to compute the health care credit or penalty. Many taxpayers will receive the new Form 1095-A Marketplace Tax Form.

5. Change your name in 2014 because of marriage, divorce, or just for fun? You need to update your name with Social Security. Until you change the name on your Social Security card, use your previous name on your tax return. Don’t worry about the name on the W-2 or 1099 not matching the tax return.

6. There are new rules about depreciating vs. capitalizing property that takes effect for the 2014 tax returns. They are called uniform capitalization rules. What does that mean to you? The good news: if you have not claimed depreciation on assets, but should have, you will be able to catch up on all the lost depreciation at once. That could mean a generous tax deduction on your business or rental.

The bad news: practically everyone who is now, or should have been, depreciating anything will have to attach a Form 3115 to make an election (a declaration) that they will be opting into the IRS’s new capitalization rules. It’s complicated. You may need professional guidance for this one.

THE INDIVIDUAL MANDATE

The Individual Shared Responsibility Provision of the Affordable Care Act (ACA) requires you and each member of your family, for each month of the year, to have “qualifying health insurance,” (minimum essential coverage) or make a payment when filing your tax return. The penalty is reported on Form 8965 and carries over to Form 1040 Line 61.

For 2014, the annual shared responsibility payment amount is the greater of: 1% of your household income above the filing requirement threshold, or the family flat dollar amount: $95 per adult and $47.50 per child, up to a $285 family maximum. This penalty is supposed to approximate the national average premium for a bronze level health plan. .

“Minimum Essential Coverage” includes: .

Employer-sponsored plans, including COBRA and retiree coverage.

Coverage purchased in individual market or the new Marketplace.

Coverage under specified government sponsored programs such as Medicare. .

The penalty for not carrying qualified health insurance increases significantly for 2015 and beyond. The point is: Get Covered!

WELCOME TO 2015 AND A NEW TAX SEASON

The biggest change to Federal income tax filing this year will be the Affordable Care Act. I predict that, by the end of this tax season, we will all be wishing Congress has adopted Universal Medicare coverage instead of the convoluted compromise that is the current law.

The major provisions of the Affordable Card Act will be administered through the individual tax return Form 1040.

First, most of you can expect to receive Form 1095-A, 1095-B or 1095-C to report if you had qualifying health coverage for some or all months during 2014.

That information funnels to Form 8965, a supporting form for Form 1040 and which enforces the Individual Shared Responsibility Provision. You and each member of your family for each month are required to have qualifying health insurance (minimum essential coverage). If you do not, unless you have an exemption, you will pay a penalty which is calculated into the income tax you owe or the refund you would otherwise receive.

Taxpayers who purchased health insurance coverage through a marketplace may be eligible for the Premium Tax Credit if their income falls below a certain level. If you received advance payments during the year, those are subtracted from the Premium Tax Credit. However, either way, you must file Form 8962 in order to claim the credit.

For now, be on the lookout for Form 1095; it will be key to filing your 2015 Federal Tax return.