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July 2015

Update on Section 4980D Excise Tax on Small Businesses

By Kathy Ploch, CPA-Houston

Earlier this year, TSCPA’s federal tax committees asked the U.S. Treasury Department for administrative relief on a new tax under Code section 4980D that fines employers $100 per day per employee for health coverage reimbursement arrangements that do not meet the Affordable Care Act  insurance reform requirements. This affects employers in the small group market that offer stand-alone HRAs to help defray the cost of employees’ insurance premiums and medical expenses. IRS Notice 2015-17 delayed penalty enforcement through June 30, 2015; employers may now be liable for the excise tax.

Section 4980D also impacts S corporations’ 2-percent shareholder-employee health care arrangements. S corporations generally rely on IRS Notice 2008-1, which provides that if they pay for or reimburse the health insurance premiums of a 2-percent shareholder-employee, then the payments are included as income and deductible under Code section 162(I). Notice 2015-17 indicated that unless and until guidance is issued, the excise tax under Code section 4980D will not be imposed, and taxpayers can still rely on Notice 2008-1 through the end of 2015.

Proposed bipartisan legislation in H.R. 2911(S. 1697), the Small Business Healthcare Relief Act of 2015, would provide a fix for section 4980D penalties by allowing those employers not subject to the employer mandate to offer HRAs to their employees. Both the House and Senate bills have been referred to committees. At this time, the proposal does not include language on 2-percent shareholder-employee arrangements. TSCPA’s Federal Tax Policy Committee is considering a letter to Congress in support of the proposed legislation.

IRS FAQ on Employer Health Care Arrangements

IRS Notice 2015-17 (Feb. 18, 2015)

IRS Notice 2008-1 (Jan. 14, 2008)

H.R. 2911 text

 

 

 


Momentum on House’s Mobile Workforce Simplification Bill

This week, the Texas Society of CPAs asked our House of Representative members to cosponsor H.R. 2315, the Mobile Workforce State Income Tax Simplification Act of 2015. This bipartisan legislation, introduced by Reps. Mike Bishop (R-MI) and Hank Johnson (D-GA), would establish a 30-day threshold and uniform rules to help ensure that the appropriate amount of tax is paid to state and local jurisdictions without placing undue burdens on employees and their employers. The bill has at least 80 cosponsors including Texas Reps. John Ratcliffe (R-4), Jeb Hensarling (R-5), Kay Granger (R-12), Lamar Smith (R-21), Pete Olson (R-22), Blake Farenthold (R-27) and Marc Veasey (D-33).

H.R. 2315 heads to the House floor this summer after passing out of its Judiciary Committee by a strong, bipartisan 23-4 margin. It’s critically important to thousands of CPA firms of all sizes, to their clients, and to CPAs working in companies of all sizes. Contact your representative today and ask them to support this very important legislation.

https://www.tscpa.org/eweb/pdf/GovtAffairs/2015/MobileWorkforce070815LTR.pdf 


Few Embrace IRS Annual Filing Season Program

By William R. Stromsem, JD, CPA

The IRS Annual Filing Season Program isn’t drawing many commercial preparers. This program is intended to encourage the voluntary efforts of unenrolled tax return preparers to increase their knowledge and improve their filing season competency through continuing education. The program is not necessary for credentialed preparers, such as CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.

As of July 1, 2015, only 11 percent of the 412,226 non-professional preparers with PTINs have met the program’s requirements (http://www.irs.gov/Tax-Professionals/Return-Preparer-Office-Federal-Tax-Return-Preparer-Statistics). For the great majority, the benefits of participating (listing in a directory of preparers and limited practice rights) apparently didn’t offset the burdens (becoming subject to Circular 230 and having to complete 18 hours of CPE, including a six-hour annual tax law update course with an exam). To try to encourage better participation, the IRS will not allow unenrolled preparers who do not participate in the program to represent clients in audits or claims for refunds for returns signed after this year.   

The IRS has sought to upgrade the quality of prepared returns, but has been frustrated. It had started a mandatory Registered Return Preparer Program in 2011, but in 2014, the Loving decision held that it did not have sufficient regulatory authority. The IRS then began the voluntary Annual Filing Season Program in 2014, and although AICPA sued to stop it, the IRS won. However, with underwhelming preparer response to the voluntary program, maybe the term “annual” in the program title is appropriate—just a year at a time.


The Perfect Storm: Has the Tide Turned Against Offshore Tax Evasion?

The government is building momentum in its effort to turn the tide against offshore tax evasion. With the fall of Swiss bank secrecy, the rise of the Foreign Account Tax Compliance Act of 2009, and an increasingly global push for cross-border transparency, we are truly entering a new era: an era marked by international cooperation. The government, with its net now cast wider than ever, is poised to haul in a big fish.    
See article by Jason B. Freeman, JD, CPA-Dallas.