Category: News & Resources

Affordable Healthcare Act Penalties

Affordable Care Act Penalty structure:

 

Individuals:

You will pay the greater of the percentage of household income OR the flat amount per person not covered/per month, up to a maximum of three times the adult penalty.

 

Year Percentage of household income (including children who work) Penalty per adult in the household Penalty per child in the household Maximum Penalty per household (3X the adult fine)
2015 2% or $325 $162.50 $975
2016 2.5% or $695 $347.50 $2,085
2017*** 2.5% plus

 

***For 2017 and later years, the fines are expected to be increased for inflation.

 

 

Small Employers:

 

Small Employers can be fined in two ways:

 

  • Penalty for Not Offering Coverage: An employer with 50 or more FTEs that does not provide health insurance that meets the “minimum essential coverage” requirements will be subject to a penalty of $2,000 per year multiplied by the number of FTEs, minus 30.So, for example an employer with 100 FTEs would be subject to a penalty equal to:
    (100 – 30) x $2,000 = $140,000
  • Penalty for Employee Contribution: If a company offers health insurance coverage that meets the minimum requirements, but requires some employees to contribute more than 9.5 percent of the employee’s W-2 wages (safe harbor), and those employees obtain health insurance through the public exchange and they receive a subsidy for coverage; then the employer would pay a penalty of $3,000 per employee receiving the subsidy.

An employer who offers health insurance coverage could still be subject to a penalty:

Example: an employer with 100 FTEs offers coverage that meets the minimum essential coverage requirements but 10 employees pay more than 9.5 percent of their W-2 wages (safe harbor) – AND the employees obtain a subsidy for coverage in the Oregon Exchange – then the employer would pay a fine for each employee receiving the subsidy or 10 FTEs x $3,000, or $30,000.

The maximum penalty for an employer with more than 50 employees that offer coverage but requires employees to pay more than 9.5 percent of an employee’s wage would be: total FTEs minus 30 FTEs times $2,000. The penalty will not be higher than the employer who offers no coverage.

Some 2016 Updates (Retirement, Mileage Rates and Tax Extenders)

Retirement contribution limits remained unchanged;

 

  • 401(k) $18,000 plus $6,000 catch-up if you are over 50,
  • SIMPLE IRA $12,500 plus $3,000 and remain unchanged for
  • Traditional/Roth IRAs at $5,500 plus $1,000.

 

 

The 2016 mileage rates are:

 

  • 54 cents per business mile driven,
  • 19 cents per medical/moving mile driven and
  • 14 cents per charitable mile driven.

 

Other Tax Extenders: Congress passed a bill on December 18, 2015.

 

  • The Section 179 deduction limits were made permanent at $500,000 indexed for inflation and
  • Special depreciation on new asset purchases has been extended through December 31, 2019.

New Oregon Sick Leave Law

Basics about the new law:

  • The law takes effect on January 1, 2016 and preempts all local sick leave laws (i.e., employers must continue to follow the current Portland and Eugene laws until January 1, 2016).
  • It covers most employees and all employers with one or more employees performing work in Oregon.
  • A PTO policy that satisfies all the other requirements of this law will be deemed compliant.

Who is eligible/required to comply:

  • Employees begin accruing sick leave immediately, but an employer can require an employee to an introductory period of up to 90 days before becoming eligible to use accrued sick leave.
  • Employees must be able to accrue at least 40 hours of sick leave per year at a rate of 1 hour for every 30 hours worked.
  • For employers with 10 or more employees working in the state, the sick leave pay rate must be equal to the regular pay rate.
  • If an employer is located within a city in this state with a population of 500,000 or more (currently only Portland), employers with 6 or more employees – regardless of where in the state those employees work – must provide paid sick leave.
  • For employers with fewer than 10 employees (or fewer than 6 in Portland), an employer must provide unpaid protected sick leave in accordance with the rules of the ordinance.
  • Employers may cap an employee’s total accrued sick leave at 80 hours.

Use and carryover

  • Employees must be allowed to use at least 40 hours of sick leave per year for any qualifying reason.
  • Qualifying reasons include the illness or injury of the employee or a family member, any OFLA-qualifying reason, any reason for leave under Oregon’s Domestic Violence leave statute, and certain public health emergencies.
  • Sick leave typically must be used in increments of no greater than 1 hour, unless it would be an undue hardship.
  • If an employer provides at least 56 hours of sick leave per year, the employer may require use in increments of no greater than 4 hours.
  • Employees must be allowed to carryover at least 40 hours of sick leave each year, unless an employer frontloads sick leave at the beginning of a leave year and pays the employee for the sick leave that is not carried over.

Notice and Medical Verifications

  • Employers may request medical verification of the need for leave for absences of more than three consecutive days or if the employer suspects an employee is abusing sick leave.
  • Employers may not request medical verifications if leave is being taken for a reason under Oregon’s Domestic Violence leave statute. For foreseeable leave, an employee must request leave as soon as practicable, but an employer may not require more than 10 days of notice.
  • An employer may generally require an employee to return the medical verification prior to going on foreseeable leave, unless that is not practicable.
  • For unforeseeable leave, an employee must request leave as soon as practicable, and an employee has 15 days to return a medical verification after it has been requested by an employer.

Tax Season to Open as Planned

“WASHINGTON — Following the passage of the extenders legislation, the Internal Revenue Service announced today it anticipates opening the 2015 filing season as scheduled in January.

The IRS will begin accepting tax returns electronically on Jan. 20. Paper tax returns will begin processing at the same time.

The decision follows Congress renewing a number of “extender” provisions of the tax law that expired at the end of 2013. These provisions were renewed by Congress through the end of 2014. The final legislation was signed into law Dec 19, 2014.

“We have reviewed the late tax law changes and determined there was nothing preventing us from continuing our updating and testing of our systems,” said IRS Commissioner John Koskinen. “Our employees will continue an aggressive schedule of testing and preparation of our systems during the next month to complete the final stages needed for the 2015 tax season.”

The IRS reminds taxpayers that filing electronically is the most accurate way to file a tax return and the fastest way to get a refund. There is no advantage to people filing tax returns on paper in early January instead of waiting for e-file to begin.

More information about IRS Free File and other information about the 2015 filing season will be available in January.”

 

(This information and more can be found at irs.gov. For the original article click here.)

IRS Announces 2015 Pension Plan Limitations

“Highlights of the changes include:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.”

 

(for the entire article including details on these changes and unchanged limitations click here.)

The entire article can be found at www.irs.gov

Contact Information

Tel: (541)389-1970

info@mcgregor-caverhillcpa.com

Fax: (541)389-1976

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Suite 102
Bend, OR 97702