Dear Clients and Friends:
Incredibly, 2013 is fast approaching its end. Although we, at POK, are barely past the extended return deadlines, there’s no time to sit back and relax because we’ve seen some startling developments within the government and know there are some big changes that could affect your 2013 Tax Return.
Take a look at what we’ve seen and what we expect.
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IRS Shutdown
On October 1, IRS offices across the country emptied as most of the agency’s employees were furloughed following a lapse in appropriations. The IRS explained that some functions would continue during the government shutdown, including the processing of tax payments, criminal investigations and some litigation. The IRS reminded taxpayers that the underlying tax law remains in effect, as do their tax obligations during the shutdown
Employer Mandate
In July, the White House announced a one-year delay in the employer shared responsibility payment and employer/insurer reporting for employers with more than 50 employees, under the Patient Protection and Affordable Care Act (Affordable Care Act.
Individual Mandate
The IRS issued final regulations on the Affordable Care Act’s individual shared responsibility requirements in August. The individual mandate generally requires individuals to carry minimum essential health coverage after 2013 unless they qualify for an exemption. An individual who does not carry minimum essential coverage and does not qualify for an exception must pay a penalty.
Repair Regulations
In September, the IRS issued long-awaited final regulations on the treatment of costs to acquire, produce or improve tangible property. The final regulations impact any industry that uses tangible property, real or personal. These new regulations affect almost 74% of our clients.
POK will be contacting all business clients and clients who own rental properties to discuss the specific application of this new law to their tax planning and preparation. We are planning some webinars to assist you in learning about this new law. Stay tuned!
Same-sex Marriage/Domestic Partners
Following the U.S. Supreme Court’s decision to strike down Section 3 of the Defense of Marriage Act (DOMA) ( E.S. Windsor, June 28, 2013), the IRS issued guidance for taxpayers and tax professionals in August. The IRS announced a general rule recognizing same-sex marriage nationwide. Same-sex married couples are treated as married for all federal tax purposes, including income and estate taxes, the IRS explained.
Net Investment Income Tax
The Affordable Care Act imposes a 3.8 percent surtax on qualified net investment income under new Code Sec. 1411, generally effective for tax years beginning after December 31, 2012. In August, the IRS released a draft version of Form 8960, Net Investment Income Tax. The IRS is expected to finalize Form 8960 before the start of the 2014 filing season. The IRS is also expected to issue final regulations about the net investment income surtax before year-end to clarify many questions about the scope of the surtax.
Tax Extenders
After 2013, many popular but temporary tax incentives (known as extenders) are scheduled to expire. They include the state and local sales tax deduction, the teacher’s classroom expense deduction, the research tax credit, transit benefits parity, and many more. Some lawmakers in Congress have proposed to include the extenders in year-end comprehensive tax reform legislation, but leaders in the House and Senate have been cool to this idea. More likely, these incentives will be extended for one or two years in a year-end stand-alone bill or linked to other legislation. Our office will keep you posted of developments on the fate of these valuable tax incentives.
Small Employer Health Insurance Tax Credit
Qualified small employers may be eligible for the Code Sec. 45R tax credit that is designed to help offset the cost of providing health insurance to their employees. In August, the IRS issued proposed reliance regulations on the credit. In tax years beginning after 2013, a qualified small employer must participate in the Small Business Health Options Program (SHOP) to take advantage of the credit. In September, the White House announced a delay in the start of SHOP.
Per Diem Rates
The IRS announced in September that the simplified per diem rates that taxpayers can use to reimburse employees for expenses incurred during travel after September 30, 2013. The high-cost area per diem increases from $242 to $251 and the low-cost area increases from $163 to $170. In 2012, the IRS did not increase the per diem rates, reflecting a directive from the White House to federal agencies to curb rising travel costs.
Innocent Spouse
The IRS updated its equitable innocent spouse relief procedures in September. The IRS explained that the updated procedures are intended to give greater deference to the presence of abuse in a relationship. Some of the factors that the IRS uses to weigh a request for equitable innocent spouse relief were also made more taxpayer-friendly.
Domestic Production Activities Deduction
Code Sec. 199 provides a deduction for qualified domestic production activities. In August, the IRS determined that a taxpayer could claim the Code Sec. 199 deduction for in-store photo production activities. However, the taxpayer could not claim the deduction where it only transferred a customer’s photos onto DVDs because those activities were a service and not the manufacturing of a product.
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We at POK hope this synopsis has given you information valuable to your tax dollar bottom line. We stand ready to assist you in every way we can to navigate the choppy waters of the tax code.
Sincerely,
The Team at Palius + O’Kelley CPA’s Inc.