IRS UPDATE: Modernized e-File (MeF) Delays Possible today

"Due to a high volume of submissions transmitters can expect delays with most service requests, including retrieving acknowledgements and States retrieving new submissions today."

(Posted at 11:00 a.m., Eastern on 4/15/2014)

Check the status of MeF here:

http://www.irs.gov/uac/Modernized-e-File-%28MeF%29-Status-Page

April 15 Tax Return and Filing Deadline Reminders

This is a reminder that the federal filing deadline for individual returns is this Tuesday, April 15, 2014.

April 15, 2014 is also the deadline for the following:

• Filing an automatic six month extension (Form 4868) — Remember the six month extension is for filing the return only. Any tax due must be paid by April 15, 2014 to avoid any penalty and interest.
• First individual estimated tax payment for 2014
• Making a contribution to an IRA for Tax Year 2013
• Filing federal partnership tax returns (Form 1065)
• Filing estate or trust income tax returns (Form 1041)

Also, for returns rejected on April 15, 2014, the return will be considered timely filed if it is re-transmitted and accepted by April 20, 2014.

The original filing deadline is later for the following taxpayers:

• U.S. Citizens and Resident Aliens — Citizens and Resident Aliens who live and work abroad, as well as members of the military on duty outside the U.S. have until June 16, 2014 to file. Any tax due must still be paid by April 15, 2014.
• Members of the military and others serving in Afghanistan or other combat zone localities — These taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For more details see Extensions and Deadlines in Publication 3 (Armed Forces’ Tax Guide).
• People that are affected by certain recent natural disasters.

Small Business Tax and Health Care Reminders for the 2014 Tax Season

As we head into the home stretch of the 2014 filing season, here are a couple of reminders related to returns that include Schedule C or other small business income tax returns.

Simplified Home Office Deduction
Beginning with Tax Year 2013 returns, a taxpayer may choose to calculate their home office expense by using the new simplified method thus removing the requirement to file Form 8829 (Expenses for Business Use of Your Home).

By using the new simplified method, the taxpayer may use a flat deduction amount of $5 per square foot for up to 300 square feet of their home for business purposes.

If this method is used, then the entire allowable home mortgage interest and property taxes may be claimed on Schedule A.

It is important to note that the criteria for claiming an office in home deduction does not change if the taxpayer chooses to use the simplified method.

For more details see the Simplified Option for Home Office Deduction page on IRS.gov and/or the 2014 Schedule C instructions for Line 30.

Small Business Health Care Tax Credit
The Small Business Health Care Tax Credit is available to businesses with fewer than 25 full time employees with average wages of less than $50,000. To be eligible, a qualifying employer must provide health insurance that covers at least 50 percent of the cost of single health care coverage for their employees.

Eligible small employers may claim this credit by completing Form 8941 (Credit for Small Employer Health Insurance Premiums) and including it with their 2013 federal tax return.

Credit is calculated on a sliding scale with a maximum credit of 35% of the employer's contribution that is made for their employees' health insurance premiums.

Maximum credit is available to employers with 10 or fewer full time employees and average wages of no more than $25,000. The credit is then reduced based on each additional employee and for each $1,000 increase in the average wages until the limits are reached.

For more information on the Small Business Health Care Tax Credit see the following:

• 2013 Form 8941 instructions
• What You Need to Know about the Small Business Health Care Tax Credit page on IRS.gov.
• IRS news article of March 10, 2014 encouraging small employers to take advantage of the Small Business Health Care Tax Credit.

IRS Health Care Tax Tips and Reminder about the Premium Tax Credit for 2014 Returns

Even though most tax provisions of the Affordable Care Act do not begin to affect federal tax returns until next filing season, the provisions will have an impact on the decisions taxpayers make if they need to obtain their health insurance through an Exchange and they receive the advanced premium tax credit (subsidy) to help them pay for their premiums. Below you will find more IRS resources available to taxpayers that help explain the tax provisions and a reminder about the Premium Tax Credit.

New IRS Health Care Tips Page
The IRS has added a Health Care Tax Tips page to their website to help individuals understand how the Affordable Care Act may affect their taxes beginning with their 2014 federal return.

At the present time this site provides links to information on:

• Premium Tax Credit
• Why it is important for individuals who obtain health insurance through an Exchange and receive a subsidy to help pay for their insurance premiums to inform the Exchange of changes in their income or family size during 2014
• Overview of the penalty for not obtaining health insurance and who is exempt from the penalty provision
• Where to obtain more information on health insurance exchanges, other tax law provisions of the Affordable Care Act, and individuals’ health care choices

The IRS will be adding to this site throughout 2014 so be sure to check it periodically to see what new information the IRS has posted.

Premium Tax Credit
Even though the calculation of the premium tax credit will not take place until next year, it is essential to become familiar with this credit. Doing so will enable you to better explain to your clients who received a subsidy how it will affect them when they file their 2014 federal return next filing season.

Below is a brief overview on the premium tax credit:

Every taxpayer who received an advanced premium tax credit to help pay for their health insurance will have to complete the 2014 Premium Tax Credit form when filing their 2014 federal return. The calculated amount of the 2014 premium tax credit will then be compared to the subsidy amount they received which will result in one of the following:

• The taxpayer will receive a refundable credit if the premium tax credit is more than the subsidy amount.
• The taxpayer will have to pay an additional tax if the subsidy amount is higher than the premium tax credit. The amount of additional tax will be limited based on where the taxpayer falls on the federal poverty line. It will range from a minimum of $300 ($600 for married filing joint) to a maximum of $1,125 ($2,500 for married filing joint).

It is important to understand that a taxpayer who receives a subsidy to help pay for their health insurance premiums is required to file a 2014 federal return and complete the premium tax credit form. This is true even if they otherwise would not be required to file a federal return. If they do not complete the premium tax credit form, they will not be able to receive a subsidy in future years.

For a more detailed explanation of the Premium Tax Credit, see the How the Affordable Care Act will Affect You and Your Tax Return - Premium Tax Credit page on the CrossLink Tax website.

Also, here are other Premium Tax Credit resources available on the IRS website:

• IRS Premium Tax Credit
• IRS Questions and Answers for the Premium Tax Credit

Additional Tax (Penalty) for Not Having Health Insurance for 2014

It is important that everyone understands what the penalty will be for not having health insurance for all or part of 2014.

If someone does not have health insurance for Tax Year 2014 the penalty is calculated as the greater of:

• 1% of their modified adjusted gross income that exceeds their personal exemption (doubled for those who file married filing jointly) plus the standard deduction for their filing status.
  Modified Adjusted Gross Income is defined as Adjusted Gross Income plus:
• Tax exempt interest
• Portion of social security income not included in income
• Foreign earned income and the housing cost of individuals who live abroad
This means the penalty will begin to be calculated once the modified adjusted gross income exceeds:
• $10,150 for single individuals
• $20,300 for married couples filing jointly
Or
• A flat dollar amount of $95 per adult family member age 18 and older, and $47.50 for each dependent under age 18. This amount is capped at $285 for Tax Year 2014.

One percent (1%) of income will begin to exceed the flat dollar amount when their modified adjusted gross income exceeds:

• $19,650 for Single individuals
• $39,300 for Married couples with no dependents
• $44,050 for Married couples with one dependent under age 18
• $48,800 for Married couples with two or more dependents under age 18

Put another way, Single individuals subject to a penalty will pay the flat dollar amount when their income is between $10,150 and $19,650. Once their income exceeds $19,650 they will pay 1% of their income.

Married couples subject to the penalty will pay the flat dollar amount when their income exceeds $20,300 and is below the income amounts above based on their family size. Once their income exceeds that amount they will pay 1% of their income.

If the taxpayer owes a penalty they must include it on their 2014 federal return.

Under the following circumstances, a taxpayer who does not have health insurance will not be subject to the penalty:

• Taxpayer does not have to file a federal income tax return because their income is below the filing threshold
• Taxpayer is uninsured for less than 3 months of the year
• The lowest cost health insurance coverage available to the taxpayer would cost more than 8% of their household income
• Taxpayer is in jail or prison
• Taxpayer is not lawfully present in the United States
• Taxpayer has a qualifying religious exemption
• Taxpayer is a member of one of the following:
• Federally recognized Indian tribe
• A recognized health care sharing ministry
• Taxpayer obtains a hardship exemption

For more information on when a taxpayer may qualify for a hardship exemption and how to apply for one, see How do I Qualify for an exemption from the fee for not having health coverage on the HealthCare.gov website.