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IRS — In 2015, Various Tax Benefits Increase Due to Inflation Adjustments

October 30, 2014 Comments off

In 2015, Various Tax Benefits Increase Due to Inflation Adjustments
Source: Internal Revenue Service

For tax year 2015, the Internal Revenue Service announced today annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2014-61 provides details about these annual adjustments.

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Explaining Health Care Reform: Questions About Health Insurance Subsidies

October 29, 2014 Comments off

Explaining Health Care Reform: Questions About Health Insurance Subsidies
Source: Kaiser Family Foundation

Good health insurance can be expensive, and is therefore often out of reach for lower and moderate income families, particularly if they are not offered health benefits at work. To make coverage obtainable for families that otherwise could not afford it and to encourage broad participation in health insurance, the Affordable Care Act (ACA) includes provisions to lower premiums and out-of-pocket costs for people with low and modest incomes. The adequacy of this assistance will be a key determinant of how many people ultimately gain coverage and whether or not lower-income people will be able to use the health insurance they obtain.

This brief provides an overview of the financial assistance provided under the ACA for people purchasing coverage on their own through health insurance Marketplaces (also called exchanges). In addition to offering financial assistance to some people purchasing their own private coverage, the ACA also gives states the option to bolster public coverage by expanding their Medicaid programs to cover people with incomes under 138% of the Federal Poverty Level (FPL). While this brief focuses on the premium tax credit and cost-sharing subsidies for marketplace enrollees, expanded coverage for low income people through Medicaid and new tax credits for small businesses are addressed in other reports.

CRS Memorandum — Memorandum: IRS Final Rule on Treatment of Expenditures for Repair/Maintenance of Depreciable Assets

October 28, 2014 Comments off

Memorandum: IRS Final Rule on Treatment of Expenditures for Repair/Maintenance of Depreciable Assets (PDF)
Source: Congressional Research Service (via National Agricultural Law Center)

In response to your request, this memorandum discusses the key elements of the final repair regulations (T.D. 9636) that the Internal Revenue Service (IRS) issued on September 19, 2013. Release of the regulations marked the completion of a nine-year journey that began in 2004 when the IRS published a notice of intent for proposed rule-making on the capitalization of expenses related to tangible property under Section 263(a). There were several significant developments along the way. The IRS issued proposed regulations on the tax treatment of those expenses in August 2006, revised those regulations in March 2008, and issued temporary regulations in December 2011. Let me know if you have any questions.

To varying degrees, all business use materials and supplies and incur expenses for the acquisition, production, repair, maintenance, or improvement of tangible depreciable property. One significant challenge they face n accounting for those expenses for tax purposes lies in having a clear understanding of the rules for determining when the expenses can be deducted as an ordinary and necessary business expense and when they must be capitalized and depreciated.

Nearly Half of U.S. Employers Expected to Hit the Health Care “Cadillac” Tax in 2018 with 82% Triggering the Tax by 2023

October 27, 2014 Comments off

Nearly Half of U.S. Employers Expected to Hit the Health Care “Cadillac” Tax in 2018 with 82% Triggering the Tax by 2023
Source: Towers Watson

Despite continuing efforts to rein in rising health care costs, roughly half of large U.S. employers will begin to hit the excise tax in 2018 and the percentage is expected to rise significantly in subsequent years, according to an analysis of large employer health care programs conducted by global professional services company Towers Watson (NYSE, NASDAQ: TW). Further, the size of the tax burden is expected to be substantial as the Congressional Budget Office (CBO) estimates the total liability for companies subject to the tax could be a cumulative $79 billion between 2018 and 2023.

Implemented as part of the Patient Protection and Affordable Care Act (PPACA), the excise or “Cadillac” tax is a 40% tax on the value of all affected health care programs a participant elects that exceed certain dollar thresholds in 2018 and beyond. This non-deductible excise tax must be paid by the employer (although some employers are contemplating charging the tax back to plan participants). A recent Towers Watson survey found that 73% of companies are very or somewhat concerned they will trigger the tax, and 62% say it will have a moderate or greater impact on their health care strategy in 2015 and 2016. The analysis revealed that 48% are likely to trigger the tax in 2018 and 82% could cross the threshold by 2023.

TIGTA — Additional Measures Needed to Provide Greater Assurance That Tax Information Provided to Health Exchanges Is Protected

October 27, 2014 Comments off

Additional Measures Needed to Provide Greater Assurance That Tax Information Provided to Health Exchanges Is Protected
Source: Treasury Inspector General for Tax Administration

The Internal Revenue Service (IRS) is authorized to disclose limited tax information to Affordable Care Act Exchanges when an applicant seeks financial assistance in obtaining health insurance. To protect the confidentiality of Federal Tax Information (FTI), the IRS has established safeguards the Exchanges must employ.

While the IRS has provided staff to facilitate the readiness of ACA Exchanges to receive FTI, additional procedures are needed to provide greater assurance that FTI will be protected prior to the IRS approving its release. That is the conclusion of a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The Impact of Piketty’s Wealth Tax on the Poor, the Rich, and the Middle Class

October 24, 2014 Comments off

The Impact of Piketty’s Wealth Tax on the Poor, the Rich, and the Middle Class
Source: Tax Foundation

In his bestseller Capital in the Twenty-First Century, Thomas Piketty recommends a wealth tax as a remedy to inequality. The basic version of Piketty’s wealth tax would impose a tax rate of 1 percent on net worth of $1.3 million and $6.5 million and 2 percent on net worth above $6.5 million. Piketty contemplates additional tax brackets, including a bracket of 0.5 percent starting at about $260,000.

We used the Tax Foundation’s Taxes and Growth (TAG) model, augmented with wealth data from the University of Michigan’s Panel Study of Income Dynamics, to estimate how the U.S. economy would respond to Piketty’s wealth taxes.

2015 Tax Brackets

October 23, 2014 Comments off

2015 Tax Brackets
Source: Tax Foundation

Every year, the IRS adjusts more than 40 tax provisions for inflation. This is done to prevent what is called “bracket creep.” This is the phenomenon by which people are pushed into higher income tax brackets or have reduced value from credits or deductions due to inflation instead of an actual increase in real income.

The IRS uses the Consumer Price Index (CPI) to calculate the past year’s inflation and adjusts income thresholds, deduction amounts, and credit values accordingly. Rather than directly adjusting last year’s values for annual inflation, each provision is adjusted from a specified base year. For more information, see the methodology, below.

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