Wtf...Forbes magazine reports that IRS Union wants out of Obamacare

Members of Congress and their staff are already seeking exemption from being required to be enrolled in Obamacare health exchange.  Now we are leaning that three of the largest unions, including one that represents IRS employees, in the nation are also seeking to opt out.

Forbes magazine writes..


In the private sector, many workers are concerned about losing their employer-sponsored health insurance coverage, and being dumped into Obamacare’s subsidized insurance exchanges. Two weeks ago, representatives of three large labor unions fired off a harsh letter to Democratic leaders in Congress, complaining that Obamacare would “shatter…our hard-earned health benefits” and create “nightmare scenarios” for their members. Today, we learn that the National Treasury Employees Union—the union that includes employees of the Internal Revenue Service—is asking its members to write letters to their Congressmen, stating that they are “very concerned” about legislative efforts requiring IRS and Treasury employees to enroll in the Obamacare exchanges.



Read more by clicking on this link

Implications of the Defense of Marriage Act

On June 26, 2013, the Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA) in U.S. v. Windsor. The decision has broad tax implications.

For one, same-sex couples can now file joint federal tax returns if the couple lives in a state that recognizes their marriage. It should be noted, however, that joint returns aren’t always beneficial. If both partners in a same-sex marriage have high taxable incomes, filing a joint return could result in more taxes being paid. For example, the modified adjusted gross income threshold amounts for calculating the net investment income tax, which applies for tax years after 2012, is $200,000 for taxpayers filing as single, $250,000 for couples filing joint returns, and $125,000 in the case of a married taxpayer filing a separate return.
In light of these considerations, we need to to assess the impact of filing a joint return for 2013. We should also review whether it would be beneficial for you to file amended returns for prior tax years for which you were married and for which the statute of limitations remains open.

Another result of the Supreme Court decision is that tax-free employer provided benefits to married same-sex partners that were previously includible in income under federal law are now excludible from income, so refunds can be claimed on this basis.

Also, the estate of a partner in a same-sex marriage is entitled to the marital deduction, which means the partner’s estate passes tax-free to his or her spouse. Other benefits of the Court’s decision include married same-sex partners now being eligible to receive federal benefits if their partner is a federal employee, as well as partners now being eligible for social security survivor benefits upon the death of a partner.

The DOMA ruling has also opened a Pandora’s box of tax questions which will be answered by future IRS guidance and court decisions:

(1) It is uncertain whether a same-sex couple that lives in a state that doesn’t recognize same-sex marriages but travels to a state that does recognize such marriages and gets married, will be treated as married for federal tax purposes.

(2) If an individual is married to a same-sex partner in a state like New York that recognizes such marriages, the fair market value of employee benefits received as a result of such marriage are excludible from the non-employee spouse’s income. But, it’s unclear what happens if the employee is transferred to a state that doesn’t recognize same-sex marriages. For example, could previously tax-free spousal benefits be converted to taxable non-spouse benefits?

(3) For the current year, it’s not clear what happens if one partner in a same-sex marriage has already filed his or her 2012 Form 1040 as single while the other partner is on a valid extension, with the expectation of filing by the October 15 deadline. Assuming they don't choose to amend both to married filing jointly (MFJ) (which presumably would be allowed), can the spouse on extension file as single or is the spouse required to file as married filing separately (MFS)?

(4) If one partner in a same-sex marriage amends his or her return from single to MFS (e.g. to reclaim imputed income from a spouse’s employment benefits), it’s unclear whether the other is also forced to amend his or her return.

(5) It’s unclear what happens in a situation where a same-sex couple has a child and one spouse filed as head of household in prior years and received child tax credits and earned income credits. For example, is the couple now required to amend as MFJ or MFS and could the spouse who took the credits be forced to return such credits?

(6) From an employer’s perspective, it’s uncertain how the Windsor decision will affect employment benefit plans for employers in different states. For example, will private companies need to consider providing spousal benefits to same-sex married employees regardless of which state the employee lives in?

We expect there will be a lot of future guidance on these and other issues.

While the full impact of the Supreme Court’s decision will not be known for a while, there are important and time-sensitive planning opportunities available now with respect to your taxes.
Please call me at your earliest convenience so we can discuss the impact this decision has on your particular situation.

June 27, 2013 Client Newsletter

Chances are you got into owning your own small business the same way I did.  I was working for another accounting firm whose clients liked me and really hated my boss.  And because I knew how to do  accounting and tax, I started my own business and never looked back.  I have been in business for more than thirty years.  I have seen my share of clients go out of business.  But I have also seen my share of clients succeed at self employment.  I have one client who has been with me since the beginning in 1982.  She is special.

There are many reasons people start their own business.  Unemployment is one reason.  Early retirement and a weak employment market has forced many people who never dreamed of owning their own business into self employment.  However, the principal reason people seem to start their own business is because they know how to do it.  Thus the accountant starts a tax business, the carpenter starts a construction firm, or the cook opens a restaurant.

We all seem to suffering from the same misbelief.  Knowing how to do what your business does is the key to success.  When in fact nothing can be farther from the truth.  In fact some small business consultants preach that the fact that you do know how to do it is the least important factor in making a small business successful and profitable.

How do I know that?

According to the United States Census figures 85 percent of small business start ups will fail in the first year. And 50 percent of the survivors will fail after the fifth year.  Even after ten years 33 percent of the small businesses will fail after The numbers are stunning.  If you have lasted more than five years, congratulations you are a survivor.  And if you have been in business for more than ten years you are a masochist.  Just kidding.

Granted this survey included many small businesses that really are not what I would consider startups.  Many are people looking to supplement their income from what I call network or multi level marketing companies. You know what I mean.  They are designed to sell products through a party.  Amway, Avon, Mary Kay, Herbalife and the like come to mind.  Traditionally the turnover of new “small business owners”  can equal 100 percent for some of these companies.  At one time Amway focused more on the tax benefits of being a small business owner than on the profit from selling its products.  This focus raised the wrath of the IRS caused many audits and almost decimated their selling force back the1980’s.

During the next few months I will be writing to you about the things that I believe these long lasting small businesses are doing to survive.  

One thing that seems to be universal to success is following the rules.  Not paying attention to the details will really come to haunt you in the future.   Back in July 2012 I wrote:

“If you want to claim the benefits of a corporation, you've got to actually use the corporation for business, not just pass funds through the corporate bank account. In one case the Tax Court disregarded the taxpayer's corporation, finding it to be a sham. The corporation observed none of the formalities of a corporate entity such as shareholder meetings, issuing stock certificates, invoices were not made out in the corporate name, etc. The Tax Court attributed all the income to the taxpayer. There can be non tax consequences too. To be sure you don't make the same mistake, we suggest you should talk to us your trusted tax adviser.  We have available at no charge to active clients, all the boilerplate templates you need to keep your corporation in compliance. All you have to do is ask.

Following up on last months suggestion that you should be taking a look at your  recordkeeping,  I found the case John H. Schoppe (T.C. Memo. 2012-153) in which the Tax Court found the taxpayer's records were inadequate to substantiate claimed deductions. The taxpayer kept track of his daily expenses on a calendar, but with only vague notations of the amounts and payees. Auto mileage records did not include the business purpose. At trial, the calendars were not offered into evidence and witnesses the taxpayer claimed could substantiate commissions paid, were not called. The Court also noted it had no reasonable basis for applying the Cohan rule. The Court sided with the IRS in disallowing the deductions.   What is the best way to beat the IRS?  Keep good ironclad records.”

I learned something. I recently represented a client who being audited by the Illinois Department of Labor in a wage/overtime dispute.   If you are paying a salary to an employee that it is under $450.00 per week, you are required by law to have that employee keep time records.  Even if that employee is not being paid by the hour.  And this has been the law for more than 14 years.  

For the next few months I will be focusing on the upcoming implementation of Obamacare.

This month I am passing on an excerpt from CNN Money article about the subject authored by Jose Paglieri that makes the point that most small businesses will be not be affected by the law’s mandate to cover their employees....

It's been uttered by every opponent of health care reform: Obamacare will kill small businesses.

                       

But the new law's rules don't apply to the vast majority of small businesses. The employer mandate, which forces firms to start providing insurance in 2014, pertains only to companies with at least 50 full-time workers. That's a tiny fraction of small businesses.

As of 2010, there were roughly 5.7 million small employers, defined as those with fewer than 500 workers. Some 97% of them have fewer than 50 employees. That means Obamacare's employer mandate applies only to 3% of America's small businesses.    

                                                    That's about 200,000 companies.                        

The critics aren't convinced: "Small businesses don't have staff with the time and expertise to deal with the new system. It's a huge drain on these smaller firms," wrote U.S. Rep. Sam Graves (R-Mo.), House Small Business Committee chair, in a recent editorial for The Washington Times.                        

Why so much focus on so few firms?  A Graves spokesman said the affected businesses include fast-growing "gazelle" firms, the startups that contribute a disproportionate amount of the nation's new jobs.                        

"The more money these companies have to spend complying with health care mandates, the less they have to hire and expand," the spokesman said.                        

                       

Those costs aren't anything to laugh at. If they don't provide insurance, businesses with 50-plus workers face $40,000 in penalties and $2,000 for each additional full-time employee.                                        

However, nearly all of those businesses already do provide insurance: 96% of those with 50-plus workers currently offer health plans anyway, according to government data.                        

That most businesses affected by the mandate already provide insurance doesn't necessarily mean their insurance is good enough or sufficiently cheap under new Obamacare rules. That's the counterpoint made by U.S. Senator John Barrasso, a Republican from Wyoming.                        

                       

"The mandates are for a lot more coverage than the average person would want, need or can afford. The business is going to have to spend time, money and have to figure that out," Barrasso said.                

For example, firms might be providing insurance that Obamacare deems unaffordable -- that is, if it costs more than 9.5% of a worker's income. But there are signs that most plans out there qualify under Obamacare's other requirement. More than 99% of those in work-sponsored plans have insurance that meets most Obamacare coverage standards, according to last year's study by NORC at the University of Chicago.    

Putting it all together, the data shows that only a tiny sliver of the nation's small businesses face the new rules -- and even fewer face any changes. Of the country's 6.5 million workplaces, only 1% must actually start providing insurance next year.

And this just in...

“Today, the IRS is an institution in crisis. In my view, however, the real crisis is not the one generating headlines. The real crisis facing the IRS – and therefore taxpayers – is a radically transformed mission coupled with inadequate funding to accomplish that mission. As a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done.”

- Nina Olson, National Taxpayer Advocate writing in her June 30, 2013 report to Congress about the IRS.

I guess I was too optimistic about getting our re-designed small business website including a podcast will be up and going this month.  We are still working on it and hopefully sometime in July it will be up and running. Cross your fingers. 

The Illinois Department of Revenue has mandated that tax preparers now must electronically file and electronically pay virtually all payroll and sales tax returns starting July 1, 2013.  This means that everyone who is now paying by check and filing paper returns will no longer have that opportunity.  Considering the continued issues the Department has had processing returns these days it may not be a bad thing.

The IRS Nationwide Tax Forums for tax preparers are back with a new format....last year they were geared toward the now found illegal registered tax preparer designation program and since I already carry a Treasury Card and was not affected by the program I chose to skip...they have pretty much mandated that your tax guy attend.   I chose the New Orleans location and will be attending in August.  Not exactly the best month to visit New Orleans but it is the sacrifice I will have to make. The seminar overlaps with the sales tax due date so we will be asking your cooperation in getting your information to us a little sooner than before. Thank you.   

                       

Our staffed office hours have changed.  We are open weekdays with a much earlier closing time this based more on work flow than the clock.  We are still available to meet with you evenings and weekends.  The only thing we ask is that you call us for an appointment.