Harless Tax Blog

Harless Tax Blog

CNBC: Congress letting 55 tax breaks expire at year-end

Thursday, January 02, 2014

Wondering which of the 55 tax breaks that are expiring at the end of 2013? Here's an informative article about these expiring tax breaks.  Caroline Harless

In an almost annual ritual, Congress is letting a package of 55 popular tax breaks expire at the end of the year, creating uncertainty—once again—for millions of individuals and businesses.

Lawmakers let these tax breaks lapse almost every year, even though they save businesses and individuals billions of dollars. And almost every year, Congress eventually renews them, retroactively, so taxpayers can claim them by the time they file their tax returns.

No harm, no foul, right? After all, taxpayers filing returns in the spring won't be hurt because the tax breaks were in effect for 2013. Taxpayers won't be hit until 2015, when they file tax returns for next year.

Not so far. Trade groups and tax experts complain that Congress is making it impossible for businesses and individuals to plan for the future. What if lawmakers don't renew the tax break you depend on? Or what if they change it and you're no longer eligible?
"It's a totally ridiculous way to run our tax system," said Rachelle Bernstein, vice president and tax counsel for the National Retail Federation. "It's impossible to plan when every year this happens, but yet business has gotten used to that."
What to expect from DC in 2014?
CNBC's John Harwood shares his predictions for the budget and the Obama administration in 2014.
Some of the tax breaks are big, including billions in credits for companies that invest in research and development, generous exemptions for financial institutions doing business overseas, and several breaks that let businesses write off capital investments faster.

Going, going ... a number of tax deductions set to expire

Friday, December 13, 2013

posted by Caroline Harless

The New Year will bring with it both new taxes and expiring tax breaks that could affect anyone from a small business owner to a wealthy individual or teachers and retirees. Before the end of the year, it is vital that you find out what tax changes will be made in 2014 and plan accordingly. This could mean that now is the time to make some large business purchases, donate to charity or sock it away into your IRA … before it’s too late. Check in with your tax accountant this month about what expiring tax breaks will mean to you. 

Seniors and the Changing Health Care Climate

Thursday, October 24, 2013

Seniors and the Changing Health Care Climate
By Donna Holm, CPA, MST

Since 2010, there has been plenty of, sometimes confusing, news about the Affordable Care Act (“Obamacare”), a complex piece of legislation to say the least. However, few seniors know how they will be affected. In the last election, 73 percent of seniors considered this to be a major issue. This is the largest piece of legislation to affect the Medicare structure since the enactment in 1965, which also had a significant impact and its share of controversy at the time. 

As you watch the news every night and see stories about the problems with the health insurance exchanges in “The Market Place,” relax. This doesn’t apply to those over age 65. The Affordable Care Act (ACA) will actually attempt to give seniors more control over their health care. However, currently this is what seniors can expect:
•New Medicare enrollees get a no-cost “Welcome to Medicare” wellness visit with their
doctor. It is not a complete physical, but rather a conversation about your medical
history and about steps that can be taken to maintain your health. In addition, the doctor
is supposed to discuss your legal advance directives. It has been said that more than 82
percent of seniors in this country have not addressed these issues. This applies to
Medicare and Medicare Advantage (Part C) enrollees. Education is the key here.
• Certain preventive services, like mammograms or colonoscopies, will be covered and you
won’t have to pay any coinsurance or deductible under Medicare (about 15 services). 
• The Medicare Part D “donut hole” for your prescription drug coverage will be eliminated
by 2020. If you spend enough on prescriptions to reach the donut hole (where you begin
to pay out-of-pocket), you will begin to receive a 50 percent discount on brand-name
prescription drugs. You should receive the discount automatically at your pharmacy
without action on your part. In 2013 the donut hole was between $2,970 and $4,750. In
2014, expect a 4.6 percent decrease. 
• Some funding will be provided to promote home- and community-based long term care
options to allow seniors to age in place. 
• Funding will be provided to implement the Elder Justice Act to help prevent and eliminate
elder abuse, neglect and exploitation. In addition, regulations will be put in place to
improve the quality of care in nursing homes, including a nationwide program for
background checks. 

Medicare was originally predicted to be bankrupt by 2016; the new provisions will extend this date to 2024. Essentially, the ACA slows down the spending growth rate. As baby-boomers age, 11,000 people are turning 65 each day, a significant burden to the Medicare system. Couple this with a reduction in population, fewer children born and the concurrent decline in the work force contributing to the fund, and one can see why reform was needed. According to the Kaiser Family Foundation, Medicare spending was expected to grow at an average annual rate of 6.8 percent between 2010 and 2019. With the ACA savings, the growth rate will be slowed to 5.5 percent annually and will be held steady with further reductions if needed. The anticipated $716 billion in savings over this period will be derived from:
 Reduction in Medicare reimbursements to hospitals because hospitals should strive for productivity increases due to technology (35%)
 Reduction in payments to hospitals for seeing uninsured patients, because ACA should reduce the number of uninsured (5%)
 Reduction in payments to home care providers (8%)
 Reduction in payments to Medicare Advantage plans, thought to be a huge contributing factor to the insolvency problem costing 14% more per beneficiary than traditional Medicare (34%)
 Reduction of fraud and abuse in the Medicare program (16%)

The new Independent Payment Advisory Board (IPAB) made up of 15 medical experts appointed by the President and approved by the Senate will oversee the ACA. The Board will be prohibited by law from increasing revenues or co-pays, changing eligibility or altering benefits. Given the current political climate, this could all be problematic. 

The downside of all of this is that many of the spending reductions will directly impact Medicare providers. Physicians are facing a significant reimbursement reduction beginning in January 2014. This might lead to a significant reduction in providers willing to provide care for Medicare patients at a time when the population is aging at a record rate; a potential tsunami on the horizon. That discussion is currently being heard at the American Medical Association, and Americans will have to stay tuned. 

To summarize, the ACA provides new benefits (preventative care) and corrects some deficiencies in existing laws (the “donut hole”). The ACA also implements new taxes to extend the solvency of Medicare while providing new restrictions on future spending and program efficiency. Note that this discussion concerns traditional Medicare. If you have an Advantage Plan (Part C), you may still be forced to the market place or at the very least, be sure to review plan changes carefully. For the most up-to-date information, refer to www.MyMedicare.gov for the e-handbook.

Donna Holm, CPA, MST is an Associate with Harless & Associates. 

It’s time to establish your Safe Harbor 401(k) Plan!

Tuesday, September 03, 2013

By Caroline Harless and Wes Littlejohn, CPA

The deadline to set up a Safe Harbor 401(k) is approaching – for this year it is October 1. If you are a business owner with highly compensated employees that would like to maximize their 401(k) contributions, you may want to consider a Safe Harbor 401(k) Plan.

In many companies, Highly Compensated Employees (HCEs) might desire participating in a retirement plan to which they contribute the maximum annual deferral amount – this is $17,500 or $23,000 for those aged 50 and older.  At the same time, Non-Highly Compensated Employees (NHCEs) might prefer to contribute at a lower rate. This can be a problem because the plan must pass discrimination testing that helps NHCEs benefit as much as HCEs.

A Safe Harbor 401(k) Plan makes it easier for the business owner and HCEs to contribute the maximum amount regardless of what other employees chose to do.  Here are the common options:
  1. The simplest and most commonly used option is the non-elective contribution of 3% of annual compensation for everyone.  
  2. The Safe Harbor also allows for matching contributions as an alternative under acceptable formulas.

The Safe Harbor Plan has numerous advantages over traditional 401(k) plans for business owners. It helps to satisfy non-discrimination testing because it stipulates that the business owner contributes to the 401(k)s of both the employees and the business owner. With a traditional plan, HCEs can only contribute 2% more than the average contribution, but with a Safe Harbor Plan, what other employees are contributing is irrelevant. Contributions are still completely tax deductible.

It is important to note that businesses must contribute to employee and owner 401(k)s throughout the year, so the funds to do this must be readily available. If year-round contributions make sense for your business, then a Safe Harbor 401(k) Plan might too. This type of retirement plan is ideal for small business owners who want to contribute at a maximum and at the same time, keep employee costs down.

If you are interested in setting up a Safe Harbor Plan, talk with a tax accountant soon to make sure you have everything in place before the 2013 deadline.

Caroline O. Harless is a General Partner of Harless & Associates as well as the co-founder, president and CEO of the affiliated financial services firm, Peachtree Capital Corporation.

Wes Littlejohn, CPA serves as Vice President of Peachtree Capital Corporation and is a CERTIFIED FINANCIAL PLANNER™ practitioner.

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