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EisnerAmper Blog

Private Business Services Blog - An Accounting & Advisory Resource

Turn Your Health Savings Account into an IRA on Steroids

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January 21, 2015

Gibson_DanBy Dan Gibson, CPA 

Health savings accounts (commonly referred to as “HSAs”) have grown in popularity over the past few years, especially in light of the Affordable Care Act. The beauty of these accounts is that you can get a deduction for contributions to the HSA. The maximum contribution in 2015 is $3,350 and $6,650 for individual and family plans, respectively; add $1,000 for those age 55 and older. When taking amounts (including investment earnings) from the account to reimburse medical expenses, the amounts are non-taxable. As most of us know, amounts coming out of a Roth IRA are nontaxable as well. However, unlike an HSA, contributions to a Roth IRA are made with after-tax dollars. See the possibility? Why not, then, treat your HSA as an investment vehicle?

I know what you’re thinking. “Hey, how am I going to get all those dollars out of my HSA without a significant amount of medical costs in the future?” There is nothing in the law or regulations against accumulating receipts of reimbursable medical expenses and reimbursing yourself years later, as long as you incurred the medical expenses after the HSA was established.    

So, you take a deduction for the contribution, like with a traditional IRA. Then, you pull the money (including earnings and appreciation) out tax-free, like a Roth IRA. That sounds like an IRA on steroids to me!

As with all investment vehicles, this may not be for everyone. Those with tight cash flow, particularly with high medical expenses, may have a tough time making this work. However, the HSA can be a tool for many in the quest to accumulate wealth.

New Year's Resolution - Mileage and Expense Logs

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December 22, 2015

By Dan Gibson, CPA  

I know it is tedious to do, but one of the most frequent hits on an IRS or state audit is the lack of documentation for auto mileage and expenses. 

My experience has been that most companies are pretty good about it when it comes to the rank and file employees, but often fall short on owners and key employees. 

During your year-end and planning discussions, I’d suggest looking at your current practices in this area and tighten them up for the upcoming year, if needed. In short, keep the following in mind: 

For Mileage: The documentation needs to include the starting point, destination, total mileage and business purpose. 

If the vehicle is owned or leased by the business, an odometer reading at the beginning and end of the year are required in order to document the personal use calculation. 

For Travel, Lodging, Meals and Entertainment: Documentation needs to show a business purpose and the expense amount. For meals and entertainment, there is a requirement to specify who attended and what business matters were discussed. Keeping receipts, whenever possible, for all these expenses is a good practice as well. 

If you are not using a log already, there are a number of searchable spreadsheets out there.  They can be used as a computer worksheet; it’s also perfectly fine to print it so that it can be updated manually. The important thing is to use something to capture the required information. 

For those who are comfortable using them, there are also apps out there that can assist in tracking mileage and expenses as well. Look around to see what works best for you and your company; here are a few links to get you started on your search: 

http://www.apppicker.com/applists/2567/the-best-mileage-tracking-apps-for-iphone-and-ipad

http://www.computerworld.com/article/2492648/mobile-apps/mobile-apps-10-smartphone-apps-that-can-help-track-your-expenses.html

http://expense-tracking-services-review.toptenreviews.com/

Phased Out of a Roth IRA?

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December 22, 2015

By Dan Gibson, CPA

 

Unfortunately, many taxpayers who would otherwise want to contribute to a Roth IRA cannot due to the income-based phase-out that ranges from $183,000 to $193,000 for married couples; $116,000 to $131,000 for singles and heads of households. However, there is a work-around for this. Taxpayers can make a nondeductible contribution to a traditional IRA account; then convert the amount from the traditional account to a Roth. This works ideally with taxpayers that do not have any traditional accounts with deductible contributions. In these cases, there is minimal tax impact on conversion. 

 

This still works for those that have traditional accounts with deductible contributions. However, under this scenario, there will normally be a greater tax impact under what is known as the pro rata rule. Without getting into the weeds, the pro rata rule requires that you consider all of your traditional IRA accounts – those with deductible and nondeductible contributions. Therefore, a portion of the conversion would be consider from the deductible contributions and be subject to tax on a pro rata basis.

FBAR Due Date Revised

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August 12, 2015

Gibson_New(1)By Dan Gibson, CPA
 
The Foreign Bank and Financials Report (“FBAR”) is used to report signature authority over or a financial interest in a foreign financial account. The report formerly done on a Form TD F 90-22.1 is now done, electronically, via a FinCEN Form 114.

Generally, for years ending through December 31, 2015, those with foreign accounts that aggregate a value that exceeds $10,000 at any time during the calendar year must file a Financial Crimes Enforcement Network (“FinCen”) Form 114. These reports are due to the Treasury Department on or before June 30 of the year following the calendar year being reported on. The filing date cannot be extended. 
 
Under the recently passed Highway Trust Fund extension law, the due date and ability to extend the due date has been revised for years beginning after December 31, 2015. The Department of the Treasury has directed that the FinCEN Form 114 will be due on April 15 of the year following the calendar year being reported on. Treasury will allow an extension for a period of 6 months that would extend the due date until October 15. In addition, the Department will be providing first-time abatement relief to those required to file for the first time who fail to request or file an extension.

Changes to Business Tax Return Filings

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August 10, 2015

Gibson_New(1)By Dan Gibson, CPA

In case you were wondering, your federal government has been hard at work. Recently, new legislation (Highway Trust Fund extension law) has come up with new filing due dates for business tax returns.

All of these changes apply to returns for tax years beginning after December 31, 2015 with the one exception described above for C corporations with June 30 year-ends.

  • March 15 – Will now be the filing due date for all calendar year-end partnerships and S corporations. This is new for partnerships and continues to be the case for S corporations. Those not filing with calendar year-ends will file their returns on the 15th day of the third month following the year-end of the entity (for example, an S corporation with a March 31 year-end would have a due date of June 15,excluding any extension).
  • April 15 – C Corporations will file by the 15th day of the fourth month following the year-end of the entity. For calendar year-end C corporations, this will mean a filing due date of April 15. The exception to the rule is for those C corporations with years ending on June 30. For these entities, the due date will remain the 15th day of the 3rd month following the year-end of the entity until tax years ending after December 31, 2026. At that time, the filing due date will be the 15th day of the 4th month following the year-end of the entity.

Extension filing periods have been affected as well.    

  • S Corporations – Will continue to be allowed an automatic extension for 6 months.
  • Partnerships – Automatic extensions will increase from 5 months to 6 months.
  • C Corporations – Calendar year-end C corporations will have an automatic extension of 5 months. C corporations with year-ends that end on June 30 will be allowed a 7-month extension. C corporations with other year-ends will be granted extensions of 6 months.


There are items in this legislation that affect other taxpayers, but more on that in future postings.

Update on Health Insurance Plan Reporting

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August 4, 2015

Gibson_New(1)By Dan Gibson, CPA

The IRS released IRS Health Care Tax Tip 2015-42 on July 21, 2015 and updated it on July 28, 2015. This notice was a reminder to all providers of health coverage, including employers that provide self-insured coverage, that they must file annual returns with the IRS reporting information about the coverage and about each covered individual. Insurance companies must also report on coverage under employer plans that are insured.

Employers will be reporting this information on Forms 1094-B and 1095-B or on Forms 1094-C and 1095-C, depending on whether the employer is an applicable large employer for purposes of the employer shared responsibility provisions. An applicable large employer is defined as an employer that employed an average of at least 50 full-time employees – including full-time equivalent employees – in the preceding calendar year.

If the employer providing self-insured coverage is not an applicable large employer, then they must:

  • Report the coverage on Form 1095-B, along with the Form 1094-B transmittal.
  • Furnish a copy of the 1095-B to the applicable employee.   

An Employer providing self-insured coverage and that is an applicable large employer, will generally report information regarding coverage of eligible employees and their covered dependents on Form 1095-C, not a Form 1095-B. 

These reporting requirements initially kick in for coverage provided in 2015. Therefore, the information forms mentioned above will be due to the IRS in early 2016.

Providers will be reporting the following information to the IRS:

  • The name, address, and employer identification number of the provider.
  • The statement recipient’s name, address, and taxpayer identification number, or date of birth if a TIN is not available. 
  • The name and TIN, or date of birth if a TIN is not available, of each individual covered under the policy or program and the months for which the individual was enrolled in coverage and entitled to receive benefits.
     
    I urge you to review my earlier posting  on this topic. If you are an employer or work for an employer as a financial executive, controller or CFO and your business provides any sort of health care insurance coverage for its employees (self-insured or not), you’ll want to address these new reporting issues as soon as possible.
  • First, determine what your reporting requirements are.   
  • Second, determine who will generate these information forms.    
  • Last, determine how much it will cost for you to get the reporting done.     

This is definitely one of those instances where you’ll want to be proactive and not wait until year-end to sort this all out!

New ACA Penalty as of July 1

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July 16, 2015

Gibson_NewBy Dan Gibson, CPA


For those small employers (less than 50 employees) who are thinking they can provide their employees with medical insurance coverage but avoid the medical insurance hassle in covering their employees with a company plan, please consider the following. Many employers have come up with a plan of just giving their employees the money to go out to purchase their own health coverage; thereby avoiding the headaches of shopping for and then maintaining medical insurance plan for their worker pools. This may have worked years ago, prior to the Affordable Care Act (“ACA”), but not anymore. Doing this could result in fines of $100 per day, per employee or $36,500 per year, per employee. The ACA is truly an employer-driven system and this rule has been set up to keep it that way.

Employers were provided some transitional relief from this penalty, but that expired on June 30, 2015.

Federal tax law prohibits any form of "employer payment plan" with respect to non-sponsored or integrated "individual" health policies (other than certain "excepted benefits" such as limited-scope dental or vision policies). Specifically, employers are prohibited from making or offering any form of payment for individual policy premiums, whether through pretax reimbursements, premium reimbursement arrangements (i.e., HRAs), after-tax reimbursements, or cash compensation. This limitation exists, regardless of employer size.

As a small business, what are your options?

  1. Get health insurance on your state’s SHOP Exchange.
  2. Hire an insurance broker/agent and ask them to obtain an ACA-compliant plan.
  3. Don’t offer any employee health insurance.

None of these are particularly creative, but the penalties being assessed by ignoring them can be onerous.

 

EisnerAmper is an independent member of Allinial Global.
EisnerAmper is an independent member of EisnerAmper Global.