Monthly Archives: March 2015

ABLE (Achieving a Better Life Experience) Act – A new way to save for children with disabilities

Pam WilliamsMarch 23, 20150 Comment

by Meagan Bulloch

The ABLE Act amends Section 529 of the IRS Code of 1986 to create tax-advantage savings accounts for individuals with disabilities. The ABLE Act will provide individuals with disabilities the same types of flexible savings tools that all other American have through college savings accounts, health savings accounts and individual retirement accounts. Most importantly this Act will prevent money saved through 529-ABLE accounts from counting against an individual’s eligibility for federal benefits programs.

As of December 19, 2014 this was signed into law by President Barack Obama.

What you should know (Adapted from NDSS):

529-ABLE accounts are “tax-advantage” savings accounts for individuals with disabilities and their families. Income earned by these accounts will not be taxed. Also the money will not be considered an asset when determining eligibility for government supported benefits.
Who is eligible – Any individual with significant disabilities with an age of onset before 26 years of age is eligible. Eligible individuals can be over the age of 26, but must have documentation of disability that indicates age of onset before the age of 26.
How much money can be saved – Under current tax law, an individual can contribute a maximum of $14,000 into an ABLE account and not be subject to gift taxes. The total limit over time that can be made into an ABLE account will be subject to the individual state and their limit for education-related 529 savings accounts. The first $100,000 in ABLE accounts will be exempt from the SSI $2,000 individual resource limit. If the ABLE account exceeds $100,000, the beneficiary would be suspended from eligibility for SSI benefits, but would continue to be eligible for Medicaid.
What expenses qualify – A “qualified disability expense” is considered an expense incurred as a result of the beneficiary living with their disability. These would include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses which will be developed in 2015 by the Treasury Department.
Can I have more than one ABLE account – No, the Act limits the opportunity to one ABLE account per eligible individual.
How is an ABLE account different from other options – ABLE accounts allow more choice and control for the beneficiary and their families. The cost of opening an account will be considerably less than setting up either a Special Needs Trust or Pooled Income Trust. The ABLE account will also be less complicated to set up and owners will have the ability to control their funds. This new approach also offers individuals living with a disability the ability to work and contribute to their own support and save for their own future with fear of losing necessary support and services.

Meagan Bulloch ([email protected]) is an audit manager at Langdon & Company LLP focused primarily on non-profit clients.

NC 2014 Tax Law Changes

Pam WilliamsMarch 16, 20150 Comment

by Leonora Bowman

Yea! North Carolina reduced the individual income tax rate beginning in 2014. That means that I will pay less tax to NC when I file my 2014 Form D-400, right? Like all tax questions the answer is “It depends.”

The following was taken from the North Carolina Department of Revenue’s Instructions for Individual Returns Form D-400:

What’s New :

For information about any additional changes to the 2014 tax law or any other developments affecting Form D-400 or its instructions, go to www.dornc.com.

Session Law 2013-316, House Bill 998, An Act to Simplify the North Carolina Tax Structure and to Reduce Individual and Business Tax Rates, was signed into law on July 23, 2013. The individual income tax rate was reduced, the N.C. standard deduction was increased, and many deductions and tax credits are no longer available for tax years beginning on or after January 1, 2014.

Change in tax rate.

The individual income tax rate is reduced to a flat 5.8 percent for tax years beginning on or after January 1, 2014 and to 5.75 percent for tax years beginning on or after January 1, 2015. N.C.

Standard Deduction or N.C. Itemized Deductions. You may continue to claim either the N.C. standard deduction or N.C. itemized deductions, however, both have changed. (See Page 8)

• N.C. standard deduction has increased for each filing status,

• No additional standard deduction is available for taxpayers age 65 or older, or blind.

• N.C. itemized deductions are no longer identical to federal itemized deductions and are subject to certain limitations.

N.C. Itemized Deductions.

• Qualified home mortgage interest and real estate property taxes are allowed as deductions. The sum of those deductions cannot exceed $20,000,

• Charitable contributions allowed as a deduction on the federal return are allowed without limitation.

Deduction for Other Retirement Benefits.

There are no longer deductions available to certain taxpayers for up to $4,000 for federal, state, or local government retirement benefits or up to $2,000 for private retirement benefits.

Deduction for Net Business Income that is Not Considered Passive Income.

There is no longer a deduction available to certain taxpayers for up to $50,000 of net business income included in federal adjusted gross income.

Deduction for Contributions to N.C. College Savings Program.

There is no longer a deduction for contributions made during the taxable year to an account in the Parental Savings Trust Fund of the State Education Assistance Authority (North Carolina’s National College Savings Program – N.C. 529 Plan).

N.C. Standard Deduction Amounts for Most Taxpayers:

Filing Status Standard Deduction

Single $ 7,500

Married Filing Jointly/Qualifying Widow(er) $15,000

Married Filing Separately $ 7,500

Head of Household $12,000

N.C. Personal Exemption Allowance.

You may no longer claim a personal exemption for yourself, your spouse, children, or any other qualifying dependents.

Credit for Children.

Amounts are increased from $100 to $125 per qualifying child for some taxpayers. If you are allowed a federal child tax credit under section 24 of the Code you are allowed a tax credit for each dependent child for whom a federal credit was allowed. The credit amount is based on your filing status and adjusted gross income, as calculated under the Code.

Child and Dependent Care Credit.

North Carolina no longer allows a tax credit for child and dependent care expenses.

Earned Income Tax Credit.

North Carolina no longer has a State earned income tax credit.

N.C. Education Endowment Fund:

Contribute to the N.C. Education Endowment Fund by making a contribution or designating some or all of your overpayment to the Fund.

Analysis of these changes:

So who will pay higher taxes? “It depends.” Families who could pay more are as follows:

Retirees can no longer deduct a portion of their retirement benefits.

Small business owners who were previously allowed to deduct the first $50,000 of self-employment income from their NC taxable income. For a married couple, who both have self-employment income that equals or exceeds $50,000, they will now be taxed on an additional $100,000 previously excluded. The tax on that is $5,800. Whether their NC tax will be higher or lower depends on their other taxable income and the other changes in deductions allowed.

Young families will no longer receive a child and dependent care credit or an earned income tax credit.

All wage earners in NC were required to resubmit withholding allowance forms to their employers in January, 2014 which would adjust the amount of state income tax withholdings typically taken from their pay. The intent by the state Department of Revenue was that the new allowances would better align with the law changes, however each individual taxpayer’s circumstances is different. NC taxpayers will have a better idea of how their state income tax withholdings match their actual income tax liability with the filing of their 2014 NC Individual Income Tax Returns. Should adjustments be necessary to increase state income tax withholdings in 2015, revised withholding allowance requests may be filed by employees with their employers at any time or alternatively quarterly estimated tax payments may be scheduled.

The Tax Team at Langdon & Company LLP will be happy to discuss these NC tax law changes with you. Please contact our office if you have additional questions.

Leonora “Lee” Bowman ([email protected]) is a Manager in our Accounting Services practice. She has over 25 years of experience in taxation and also specializes in multi-dimensional corporate accounting across various states.

The “Legacy Drawer”

Pam WilliamsMarch 9, 20150 Comment

by Brittany Spragins

While it is extremely hard to think about, someday you will pass away. What will happen to your spouse, kids, grandkids, and other loved ones? Have you heard of the “Legacy Drawer?” Here is what it contains:

Cover Letter – this will explain the purpose and organizational system of the drawer.
A Last Will and Testament (a “will”) – Make sure to have an updated copy of your will. Without one, the government divides your assets as they see fit; your own wishes are irrelevant. If you have children, the government also picks their guardian.
Make sure that the will is updated after major life events such as marriage or divorce, birth or adoption of a child, or moving to a new state.
Make sure that this contains the names of the executor and Power of Attorney for the estate.
Financial Information – anything involving money
Include account names, numbers, and approximate balances
Credit cards accounts and online login information
Loan Documents
Safe Deposit Box location and information
Insurance Provider Information – include a summary page of all types of insurance
Policy type
Policy Numbers
Provider Contact Information
Funeral Instructions – Include as much as you can to ease the burden on your family. Your family will already be grieving your loss, so if you have songs or locations picked out, let them know.
Legal Documents – copies of birth certificate, marriage license, car titles, house deeds, social security card, etc. If you think it may be needed to help settle your estate, and then include it in here.
A letter to your loved ones- They will be missing you and a personalized letter from you reminding them of your love will be a special gift for them. You can leave remaining pearls of wisdom, or just the opportunity for them to hear your words in a lasting legacy.

Update the information periodically, if you get a new bank account or pay off a loan, then just add or remove the file accordingly.

I realize that there are a lot of items to include, and it will take some time to locate and organize these, but stick to it. If it would take time to do now, imagine the stress on your loved ones if they are doing it because you are gone. This is one way that you can ease the burden on your family and remind them how much you love them.
Outline provided by Dave Ramsey http://www.daveramsey.com/article/legacy-drawer-keep-your-family-prepared/lifeandmoney_relationshipsandmoney/.
Brittany Spragins ([email protected]) is a staff accountant with Langdon & Company LLP and works with our healthcare consulting and tax departments.

Premium Tax Credit Reporting

Pam WilliamsMarch 5, 20150 Comment

by Kendall Tyson

Beginning in 2014, individuals and families with low or moderate income could purchase health insurance through the Health Insurance Marketplace, also known as the Exchange. The premium tax credit is an advanceable, refundable tax credit designed to help those individuals and families. The credit could be paid in advance to insurance companies to lower the monthly premiums or the credit could be claimed with the individual tax return. If the credit was paid in advance, individuals must reconcile the amount paid in advance with the actual credit computed on the individual’s tax return.

Reporting and Claiming:

Will I have to file a federal income tax return to get the premium tax credit?

For any tax year, if you receive advance credit payments in any amount or if you plan to claim the premium tax credit, you must file a Form 8962, Premium Tax Credit (PTC) and attach it to your federal income tax return for that year. If you receive any advance credit payments, you will use your return to reconcile the difference between the advance credit payments made on your behalf and the actual amount of the credit that you may claim. This filing requirement applies whether or not you would otherwise be required to file a return. If you are married and you file your tax return using the filing status Married Filing Separately, you will not be eligible for the premium tax credit unless you meet the criteria in Notice 2014-23, which allows certain victims of domestic abuse to claim the premium tax credit using the Married Filing Separately filing status for the 2014 calendar year.

Will I be eligible for the premium tax credit if I’m married but I file my tax return using the filing status Married Filing Separately?

If you are married and you file your tax return using the filing status Married Filing Separately, you will not be eligible for the premium tax credit unless you meet the criteria in section 1.36B-2T(b)(2) of the Temporary Income Tax Regulations, which allows certain victims of domestic abuse and spousal abandonment to claim the premium tax credit using the Married Filing Separately filing status. Taxpayers may claim this relief from the joint filing requirement for no more than three consecutive years.

Note: Generally, a married taxpayer who lives apart from his or her spouse for the last six months of the taxable year is considered unmarried if he or she files a separate return, maintains as the taxpayer’s home a household that is also the main home of a dependent child for more than half the year, and furnishes over half the cost of the household during the taxable year.

For purposes of the relief from the joint filing requirement for certain victims of domestic abuse and spousal abandonment, how are domestic abuse and spousal abandonment defined?

Domestic abuse includes physical, psychological, sexual, or emotional abuse, including efforts to control, isolate, humiliate, and intimidate, or to undermine the victim’s ability to reason independently. All the facts and circumstances are considered in determining whether an individual is abused, including the effects of alcohol or drug abuse by the victim’s spouse. Depending on the facts and circumstances, abuse of the victim’s child or other family member living in the household may constitute abuse of the victim.

A taxpayer is a victim of spousal abandonment for a taxable year if, taking into account all facts and circumstances, the taxpayer is unable to locate his or her spouse after reasonable diligence.

If I get insurance through the Marketplace, how will I know what to report on my federal tax return?

If you purchased coverage through the Health Insurance Marketplace you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace by early February. This form provides information you will need when completing Form 8962. If you have questions about the information on Form 1095-A for 2014, or about receiving Form 1095-A for 2014, you should contact your Marketplace directly. The IRS will not be able to answers questions about the information on your Form 1095-A or about missing or lost forms.

Filing electronically is the easiest way to file a complete and accurate tax return. Electronic Filing options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.

How is the amount of the premium tax credit determined?

The law bases the size of your premium tax credit on a sliding scale. Those who have a lower income get a larger credit to help cover the cost of their insurance. In other words, the higher your income, the lower the amount of your credit.You will figure your credit on Form 8962. You must complete this form to claim the premium tax credit and reconcile any advance credit payments with the premium tax credit you are eligible to claim on your return. Form 1095-A from your Marketplace provides information you will need when completing Form 8962.(see question 14) Filing electronically is the easiest way to file a complete and accurate tax return. Electronic Filing options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance

Additionally, the premium tax credit is a refundable tax credit. This means that if the amount of the credit is more than the amount of your tax liability, you will receive the difference as a refund. If you owe no tax, you can get the full amount of the credit as a refund. However, if you receive advance payments of the credit, you will reconcile the advance payments with the amount of the actual premium tax credit that you calculate on your tax return. If your actual allowable credit on your return is less than your advance credit payments, the difference, subject to certain caps, will be subtracted from your refund or added to your balance due. If your actual allowable credit is more than your advance credit payments, the difference will be added to your refund or subtracted from your balance due.

This excerpt and additional Q&A information on the Premium Tax Credit can be found on the IRS website: http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Questions-and-Answers-on-the-Premium-Tax-Credit#.VNO4_QFEocQ.gmail

Kendall Tyson ([email protected]), a Tax Manager at Langdon & Company LLP. She specializes in physician/dentist practices, multi-state and nonprofit returns.