The laws target around 70 tax provisions that expired in 2013, items including education credits, accelerated depreciation of capital expenditures and others, said Eric Morgan, CPA manager at local firm BiggsKofford. Because the Internal Revenue Service must program the changes into its systems and forms, that could delay the start of filing season.
“It will result in a compressed filing season that will start later and end April 15,” Morgan said. “It will take the IRS a while to program their systems and release final tax forms” because tax regulations dictate the contents of IRS forms.
“If they change that at the last minute, that will change what potentially would be on the forms.”
This type of behavior is not unusual during an election year.
“Two years ago, [Congress] made a deal Jan. 2, and it slowed down the start,” he said. “This Congress can’t get anything done.”
While Congress argues over the rules, this time of year is a good time to consult with tax advisors, Morgan added.
“We help clients forecast their liability so they don’t have surprises down the road. Talk to your advisor to try to determine what your liability will be and to determine strategies to reduce the liabilities.”
Tangible Property Regulations
Required for the 2014 tax year, Tangible Property Regulations, or TPRs, will impact all business owners, some favorably and others unfavorably, said Trinity Bradley-Anderson, CPA and tax partner at Stockman Kast Ryan + Company.
One thing is certain: The TPRs will result in clients paying more to their accountants this year to comply with the law, she said.
The regulations provide guidelines for taxable treatment of tangible business expenditures, whether they’re personal property or real property. The IRS issued regulations that deal with whether an expenditure should be capitalized and depreciated or whether it can be written off as a business expense.
Capitalization and depreciation aren’t new to taxes. The new rules will “present new risks and opportunities that affect taxpayers in every industry that owns depreciable capital assets, spends funds on repairs and maintenance, and/or material and supplies,” Bradley-Anderson said.
If a business has a $100,000 expense, it can capitalize it by taking a $2,000 per year deduction on the expense for 39 years. Or, the business can write it off in one year, Bradley-Anderson added.
“You don’t have to cap it. If you want a write-off, you get the benefit now,” she said.
“Before, the rules were a lot more stringent. If you added a $30,000 boiler, you would most likely say you have to capitalize it [over 29 years]. In the new regulations, you get to write it off [this year]; you don’t have to capitalize it.”
The rules themselves are “taxpayer-friendly. We’re going to be able to write off more costs,” Bradley-Anderson said.
Accountants charge fees based on the time they spend on a client’s taxes, and the process to become compliant with the TPRs is time-consuming, leading to higher accountancy charges.
“It’s going to cost a lot more. It’s a time-consuming process. We have to look at each taxpayer’s depreciation schedule to see how they treated costs under the old rules and compare it under the new rules,” Bradley-Anderson said. “We have to do that for every single taxpayer that owns business property.”
That includes taxpayers who own businesses, rental property and farm and ranch income.
“They are mandatory; we have no choice,” she said.
Affordable Care Act
Scheduled to go into effect this year, the employer mandate to have insurance for employees and facing penalties for not complying with the law were delayed a year because “Congress didn’t think we were ready for it,” said Bernie Benyak, CPA, senior tax manager and Certified Financial Planner at Stockman Kast Ryan + Company.
Small businesses of 50 to 99 full-time equivalent (FTE) employees are not required to provide insurance for their employees this year, Morgan said. Businesses must have a minimum of 50 FTEs for the law to be required in 2016 when it’s fully phased in.
Businesses with 100 or more employees must provide health benefits to at least 70 percent of their FTE employees in 2015 and 95 percent by 2016.
Businesses that do not comply with this law face a penalty of up to $3,000 per employee; however, the first 30 FTEs are exempt if the employer does not offer insurance.
“It’s not going to affect a lot of small businesses right off the bat,” Morgan said.
Individuals were required this year to have health insurance under the Affordable Care Act. People who were not insured this year face tax penalties.
The penalty for someone not insured this year is the greater of $95 per uninsured person in the tax filing family, or 1 percent of the income over the filing threshold, Morgan said.
Penalties increase every year after that. The 2015 penalty is the greater of $325 per uninsured person in the tax filing family, or 2 percent of the income above the filing threshold.
In 2016, penalties are $695 per uninsured person or 2.5 percent of household income above the threshold.
Persons not covered under an employer’s policy may go to the state’s health insurance marketplace, connectforhealthco.com
to obtain insurance.
There, people who have low incomes can obtain insurance at lower rates that are subsidized by the government.
People with even lower incomes are eligible for Medicaid, which is compliant with the Affordable Care Act.
Some employers schedule employees to work 30 hours or less per week, thinking they’re not required to provide them insurance, said Benyak.
However, all hours worked contribute to the FTE total, he said.
For example, if a company has 80 full-time employees and another 40 who work 15 hours a week, the firm must multiply 40 (the part-time employees) by 15 (the number of hours they work).
The result is 600, which is divided by 30 (FTE number of hours per week) to result in 20 FTEs. That 20 would be added to the 80 to result in the final number of FTEs the firm has, Benyak said.