Timeline of Tax Changes in Healthcare Reform Legislation

Close to a month ago, Congress passed and the President signed into law legislation that overhauls the U.S. health care system and affects nearly all taxpayers, many employers, and many elements of the health care industry (the Patient Protection and Affordable Care Act & the follow up Reconciliation Act, i.e. Health Care Act). The massive overhaul contains a host of tax changes, many of which are both complex and novel. To compound the challenge, the tax changes go into effect over a number of years. We’ll start with a few of the main tax law changes and then present a

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HIRE Act: Payroll Tax Exemption & Retention Credit

Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire certain previously unemployed workers. The first, referred to as the payroll tax exemption, provides employers with an exemption from the employer’s 6.2 percent share of social security tax on wages paid to qualifying employees, effective for wages paid from March 19, 2010 through December 31, 2010. In addition, for each qualified employee retained for at least 52 consecutive weeks, businesses will also be eligible for a general business tax credit, referred to as the new hire retention

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The Housing Assistance Act of 2008

The Housing Assistance Tax Act of 2008, (“the Housing Act”) was signed into law on July 30, 2008. The Housing Act consists of tax breaks for homebuyers and homeowners. To offset these tax breaks, the Housing Act also includes revenue raisers, the most important being the reduction of the homesale exclusion. Below is a summary of the three main provisions of the Housing Act: Credit for first-time homebuyers, Property tax deduction for non-itemizers, and, Tightened homesale exclusion revenue raiser. Credit for first-time homebuyers The single largest provision in the Housing Act is a measure allowing individuals buying their first home

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IRS Shortens Extension Period for Partnerships (including LLC filing as partnerships), and Estates/Trusts

The IRS has shortened the extension period from 6 to 5 months for Partnerships (including Limited Liability Companies filing as partnerships), and Estates/Trusts that file Form 1041. This one-month reduction is effective for returns due on or after January 1, 2009. Note that the original due date of April 15th (for calendar year taxpayers) has not been changed. Thus, the new law changes the extended due date to September 15th, rather than October 15th. The rationale for the earlier due date is that this will allow individual taxpayers to receive their Schedule K-1s in advance of the October 15th extended

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Common-Law Factors Indicating Employee Status

Below we have reproduced an excerpt from an article by the American Institute of Certified Public Accountants (“AICPA”) regarding the common factors that the IRS takes into account when determining employee vs. independent contractor status. The factors are intended as guidelines, not as strict rules. The IRS itself says, “the degree of importance of each factor varies depending on the occupation and the factual context in which the services are performed.” The IRS developed the factors based on relevant cases and rulings. They focus on the substance of the arrangement—whether the person for whom the services are performed exercises sufficient

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Tax planning for college

As a parent with college-bound children, you are or will soon be concerned with either setting up a financial plan to fund for future college costs, or, if your children are already college age, with paying for current or imminent tuition, etc. bills. We’d like to address both of these concerns by suggesting several approaches that seek to take maximum advantage of tax benefits to minimize your expenses. (Please note that the following suggestions are strictly related to tax benefits. You may have non-tax-related concerns that make the suggestions inappropriate.) Planning for college expenses. In many cases, transferring ownership of

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Home Office Expense Deduction for Self-employed Taxpayer

If you’re self-employed and work out of an office in your home, you should know about the strict rules that govern whether you can deduct your home office expenses. You may deduct your home office expenses if you meet any of the three tests described below: the separate structure test, the place for meeting patients, clients or customers test, or the principal place of business test. You may also deduct the expenses of certain storage space if you qualify under the rules described further below. If you do qualify, you compute your home office deductions on Form 8829, and report

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Like-kind exchanges, general rules

You might be able to dispose of appreciated property without being taxed on the gain by exchanging it rather than selling it. You can defer tax on your gain through the “like-kind” exchange rules. A like-kind exchange is any exchange (1) of property held for investment or for productive use in your trade or business for (2) like-kind investment property or trade or business property. For these purposes, “like-kind” is very broadly defined. As long as the exchange is real estate (land and/or buildings) for real estate, or personally (non-real estate) for personally, it should qualify. However, exchanges of some

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Taxation of social security benefits

How Social Security benefits are taxed depends on your other income. In the worst case scenario, 85% of your benefits would be taxed. (This doesn’t mean you pay 85% of your benefits back to the government in taxes—merely that you would include 85% of them in your income subject to your regular tax rates.) To determine how much of your benefits are taxed, you must first determine your other income, including, for this purpose, tax-exempt interest. Add to that the income of your spouse, if you file jointly. To this add half of the Social Security benefits you and your

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Incentive stock options (ISOs)

This month’s Tax Tip expands on last month’s Stock Option discussion to address Incentive stock options (ISO) in more detail. For the purposes of this discussion, let’s assume the ISO gives you the right to buy 1,000 shares of the company’s stock at its fair market value at the time of the ISO’s grant (expected to be about $100 per share) for a five-year period following the grant. The grant of the ISO to you will not be taxable. Nor will your later exercise of the ISO (except that it may make you subject to the alternative minimum tax, see

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