Feb 062013
 

The IRS has issued proposed guidance pertaining to the Shared Responsibility payments now required under the Affordable Care Act.  What this notice boils down to is that the IRS has provided various safe harbors employers may rely on when determining whether an employee is a full-time employee for purposes of the Affordable Care Act (and section 4980H of the Internal Revenue Code).  While Notice 2012-58 is proposed guidance, it is also interim guidance, thus the IRS has given employers something they can comfortably use and rely on through 2014, and possibly longer.

The IRS is also seeking comments on the proposed guidance.

IRS Notice 2012-58

*Disclaimer: I will not comment on the substance of this Notice, as it was written by the one of my colleagues at the IRS Office of Chief Counsel.

 February 6, 2013  Posted by at 10:00 am No Responses »
Oct 292012
 

For 2012, estates valued up to $5.12 million are excluded from the estate tax.  Amounts exceeding the exclusion amount are taxed at a rate of 35%.  However, on January 1, 2013, the law establishing these amounts is set to expire.  After that the excluded amount will reduce to $1 million, and amounts over that are set to be taxed at a rate of 55%.

There is much speculation over whether Congress will act to extend the current rates.  And if Congress does act, there are a variety of scenarios that could take place.

  • The 2012 rates can be reinstated.
  • The 2012 rates can be reinstated, but indexed for inflation.
  • The 2013 rates can be left in place.
  • The 2013 rates can be left in place, and indexed for inflation.
  • The estate tax can be eliminated.
  • There can be a middle ground, where the exclusion amount is in the $3 million range, and the tax rate is 45%.

I believe the most likely is the last scenario.  However, I also believe it will not occur until January or February.  The current Congress is unlikely to act before the election (which is only a week away), and the results of the election will impact how successfully Congress can pass new legislation during the lame duck session.  I do not believe the estate tax will be eliminated, even with a Republican controlled House and Senate and a Republican president.

What thoughts do others have about the future of the estate tax?

 October 29, 2012  Posted by at 11:47 am 1 Response »
Oct 232012
 

The IRS released Revenue Procedure 2012-41 last week, announcing the inflation-adjusted amounts for a wide range of items for calendar year 2013.

Of particular note are the minimum and maximum deductible amounts and maximum out-of-pocket amount for high deductible health plans for individuals who maintain a Medical Savings Plan.  For self-only coverage, the deductible cannot be lower than $2,150 and cannot be higher than $3,200; the maximum out-of-pocket expenses to be paid is $4,300.  For family coverage, which is any coverage other than self-only, the deductible cannot be lower than $4,300 and cannot be higher than $6,450; the maximum out-of-pocket expenses to be paid is $7,850.

The annual gift tax exclusion for 2013 is increasing to $14,000.

The IRS also issued a news release last week announcing 2013 pension plan contribution limits.

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is increased from $17,000 to $17,500.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $5,500.
  • The limit on annual contributions to an IRA rises to $5,500, up from $5,000 in prior years.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have adjusted gross incomes between $59,000 and $69,000, up from $58,000 and $68,000 in 2012. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $95,000 to $115,000, up from $92,000 to $112,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $178,000 and $188,000, up from $173,000 and $183,000.
  • The adjusted gross income phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012. For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.

The 2013 inflation adjusted amounts for Health Savings Accounts was previously issued in Revenue Procedure 2012-26.  For 2013, the annual contribution limit for an individual with self-only coverage is $3,250; the limit for an individual with family coverage is $6,450.  The catch-up contribution for individuals age 55 or over remains unchanged at $1,000.  To be an eligible individual for 2013, the high deductible health plan must have a minimum deductible of $1,250 for self-only coverage and $2,500 for family coverage.  Additionally, the annual out-of-pocket expenses cannot exceed $6,250 for self-only coverage and $12,500 for family coverage.

 October 23, 2012  Posted by at 12:50 pm No Responses »