Deal Smartly with ACA Challenges to Stay Compliant!


Affordable Care Act (ACA) has hit the employers’ serenity in a big way and forced them to remain compliant with the new changes. According to reports, in 2015, only 70% full-time employees had to be offered health care coverage, which after some new amendments, rose to 95%. This has led to more burden on the employers adding up more compliance issues, affordability calculations and high concerns regarding employment status and calculations.

Here are the four topmost employer concerns revolving around ACA Compliance:

Employers Are Getting False Hopes!

After witnessing stringent rules and complexities, most of the employers get a false hope that compliance requirements will be delayed or removed (due to its complications). As a result, they wait for the expected outcome. But, most of them, get severe penalties due to late filings. Sometimes, Internal Revenue Service (IRS) does give the extension, but this does not mean that employers can get away from penalties in case of non-compliance or missing any important deadlines.

Lack Of ACA Knowledge!

Understanding the basic requirements and employee eligibility for offering coverage as per ACA mandates is the major requirement in attaining compliance and saving yourself from the heavy penalties. But, most of the employers don’t know which workers qualify as full-time employees and what they have to do as per the rules. This creates a baffling situation for most of the employees and makes the whole process little troublesome.

Clearly, ACA eligibility is one of the toughest parts and remains an area of concern for the employers as they move through the calendar. For this, you need to have an ongoing, accurate, and focused team to track evolving federal rules and regulations. This will help you stay compliant.

Lack Of Proper Resources!

Filling a simple IRS form is not so easy task as it seems to be. Most of the HR departments assumed IRS filing as a cakewalk and did not put much efforts to contemplate on the vital requirements. But, now they are realizing that they need a lot of information and tech assistance from different departments to comply by all the requirements and submit the forms to IRS within the given time limit.

How Can An Experienced Broker Help?

It is no surprise that with the rising complexities and challenges revolving around ACA compliance, employers do need an expert assistance to fulfill the requirements. This is how a broker’s role comes into picture!

But, many employers get into trouble after choosing the wrong broker. As they couldn’t handle the basics and also provide their clients with wrong information leading to ACA troubles. Therefore, choosing the right broker is the way to get things through without any violations.

 A broker can help his/her clients by providing the solutions rather than just doing the business. They can act as a consultant and trusted advisor to their clients and can save them big from the heavy ACA penalties. Therefore, it is very important to have a right broker by your side. Do proper research before choosing any!

Putting All Together:

Observing things superficially and not understanding the complete scheme can cost you big and may increase your burden. Therefore, it is better to have proper details and knowledge of each and everything that is related to ACA before it gets too late. A comprehensive broker can help you largely by guiding you to the right path alleviating your ACA troubles.



April 18 is this Year’s Tax Day! Tips to Consider Before Filing Returns

To give a little relief to tax payers who have still not filed their returns, this year’s tax deadline for Federal, State and City of Detroit income tax returns is shifted from the traditional April 15 to April 18.

The new deadline has been announced due to an overlap of the tax deadline and Federal/State Holidays. Emancipation Day, which is a legal holiday in the District of Columbia and falls on April 16, has been shifted to April 15. This is why tax returns will be due on Monday, April 18, 2016.

April 18 is this Year's Tax Day-Recovered

In addition to it, it is Patriot’s Day in Maine & Massachusetts on April 18, so the tax payers of respective regions can file their returns by following day, i.e. April 19, 2016.

Well! Such extensions are always welcomed by the individuals who have a habit of filing their returns only at the 11th hour!

Here are a few tips for filing tax returns for the tax year 2015:

Tip #1: If you are not able to File on Time, File an Extension Request

In case, it is not possible for you to file your returns on time, make sure that you file a 6-month extension request. However, if you owe any dues, then you are not getting any extension on that. Thus, if you have any dues, try pay them on time as even if you get extension on filing returns you will have to pay interest on past-due tax and can even get subjected to pay penalty for late-payment.

Related –FAQs On Late Payment & Late Tax Filing Penalties

Tip #2: Use Options provided by IRS to Pay Your Dues, Even When Filed Extension

With the help of IRS Direct Pay, tax bills can be paid electronically as it accepts fund transfer from bank accounts, debit card or credit card. Tax payers can even make payments via phone. The Electronic Federal Tax Payment System accepts the payments but requires enrollment. It is a more preferable option for business owners.

Moreover, if you wish to pay using money order or check, send it to the address as mentioned on Form 4868.

Related –Before E-filing Your ACA Returns, Learn About These Terms & Facts

Tip #3: Cross-Check the Details Before Filing

Before filing your returns, make sure you cross-check the figures and related details such as Social Security numbers of themselves, their spouses or children; bank account numbers in case DD’s are used for the refund. Make sure you duly sign the return as IRS does not accept an unsigned tax return. Thus, you and your spouse must sign a joint return.

Though you’ve got an extended deadline to file your returns, these are a few considerations that you must take in account before filing your tax returns. Make sure you adhere to the IRS requirements in order to avoid any unwanted penalties.

Major Tax Worries and Their Elimination.

Nowadays, small business owners are struggling hard with the tedious task of organizing the financials records along with increasing sales and opportunities. This eats up most of the productive time of the businesses per year due to engaged resources in tax preparation. The very initial step for a well-organized and effective tax preparation is to lessen the time consumption and stressful procedures.

The increasing technologies can help businesses accommodate all their information at one single location to reduce the time consumption in gathering information from multiple sources. It also helps in organizing the financial records so as to process the information quickly as compared to managing the paperwork manually. But as per the recent studies two out of five business owners or the tax payers lack in updated financial records due to underutilized modern tools.

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For small businesses, digitizing the records in system can reduce their stress and worry during tax season:

1. Correctly Entered Data: Elimination of manual data entry reduces the human error, since the system software is extracting the required information from digitized records maintained at your end.

2. Receiving Proper Deductions: A smart system can itemize the costs in the same manner the IRS uses, this ensures the properly tracked deductibles.

3. Handling Audit Process: Justification of deductible expenses can be easily done by having all the information gathered at one place which reduces the worry of being audited. Technology allows you to search through the system as per your concern instead of engaging yourself in with the papers.

Read Also – FAQs On Late Payment & Late Tax Filing Penalties

Strategies to make tax season simpler for the small business owners:

Investing in retirement: Small businesses can create retirement plans to have an advantage in tax deferral rules, maximizing tax savings and retirement savings.

Benefit your business by investing in counsel: For continual health of your organization, having a meaningful counsel of professionals can drastically change your tax situation and remove end-of-year scramble of tax planning.

Understanding of taxable and untaxable fringe benefits: Fringe benefits include subsidized meals and insurances. These are the means to provide services to the employees and are taxable most of the time. By knowing which fringe benefit is excluded by the law from taxable realm eases the taxation every year. Therefore, understanding and choosing for the appropriate fringe benefits is important for your company.

Prioritize the tax balancing: To avoid the complex situation of taxation in next year, the wise way is to collect income and delay deductibles expenses at present balancing the tax.

As expediting expense payments while deferring income payments can improve the tax position.

Easy Tax season leads to streamlined bookkeeping

Not using technology to organize the records results in scattered paperwork as well as errors and difficulties entailed with manual handling thus, leveraging on technology for tax preparation results in clearer and streamlined bookkeeping all year round with fewer worries. Moreover, having a system in place to manage tax processing will also help business owners focus on other strategic areas for growth and development.

How to Manage Medical Expense Deductions In Your Annual Tax Returns!

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As the deadline for filing tax returns comes near, all the employers as well as employees have started making their preparations. The basic information and data that needs to be collected mainly includes the previous year’s deductible expenses including medical costs.
Majority of individuals include the medical expenses in the deductions as it lowers the tax amount considerably and at the same time helps cover medical costs. But not many of the employees are completely aware of the governing rules of medical expense deduction.

Medical Expense Deduction Computation:

Medical expenses include the costs associated with the diagnosis, treatments, cure, or prevention from any disease that has been recognized by the medical community and the costs for treating any problem that affects any area or functioning of any body part. Qualified medical deductions are the paid expenses for individual, spouse or dependent during the previous year.

For calculating deductions, you can only deduct those expenses that are above 10% of your adjusted gross income (AGI). This is also called “AGI floor”. For example, if your AGI is $45,000, then you will be allowed to make deductions if your medical expenses exceed $4500 (10% of AGI). So, if your total medical expenses cost $5500, then you would be able to deduct $1000 from your taxes, whereas if your medical expenses cost $2000, then would not be able to deduct any amount from your tax.

Special Case:

Until this year, the tax payers above 65 years are exempted and allowed to deduct the medical expenses exceeding 7.5% of their AGI. But this exemption will expire on December 31, 2016 and after that every individual irrespective of age or gender will be allowed to deduct expenses exceeding 10% of AGI.

Read Also – General FAQs On Late Payment & Late Tax Filing Penalties

Medical Expenses Deduction Rules:

IRS has given clear instructions for qualified medical expenses. Only a certain ones can be deducted from the tax. There’s a quite comprehensive list of qualified deductible expenses.

  • Preventive Care & Therapy, Insurance premiums and prevention drugs are deductible.
  • Expenses do not only include the treatment of diseases, injuries or medical emergencies, travel costs for treatment can also be included in total expenses. Travel costs include ambulance service, toll and parking fees, public transportation costs as well as cost of using personal vehicle.
  • Itemized deductions are preferable as they help IRS better verify the deductions for considerate medical expenditure.
  • If you paid for the expenses with your Health Savings Account (HSA) or Flexible Spending Arrangements (FSA), then no deductions are allowed as HSA & FSA are already exempted from taxation.
  • Only the previous year’s expenses can be included in the deductions.
  • In most deductions, the medical expenses need to be itemized and declared in Schedule A of the form, which is subsequently attached with employee’s 1040 tax return and sent to the IRS.

Dovetailing the above, managing medical expenses and deducting them from the taxes is undoubtedly a painful task for everyone. Thus, you must seek an expert assistance from the professionals in order to handle the taxes and benefits efficiently as well as stay up with the necessary IRS deadlines and provisions.

Mid-Year Changes To Safe Harbor Plans Liberalized By IRS

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The IRS recently issued a Notice 2016-16 providing guidance on the mid-year changes to Safe Harbor 401(k) plans. The notice clarifies when and under what conditions the changes made will not violate the applicable regulations of the law.

Since the first Safe Harbor plan design was made available in 1999, the IRS has, time and again, been stating that a plan sponsor cannot make mid-year changes to a safe harbor 401(k) plan without a possible loss in plan’s safe harbor and qualified status.  Such restrictive rule has been creating confusion and frustration among the plan sponsors, who often feel the need to make mid-year changes to their plans, for long time. The new guidance marked a prominent change to the IRS’s long-held position on the entire issue.

The Permitted & Prohibited Changes

Mid-Year Changes that are permitted

A mid-year change to a safe harbor 401(k) plan will not result in a plan to lose its safe harbor status as long as:

  1. The change is not categorized under the prohibited mid-year change, as illustrated in the IRS Notice; and
  2. The mid-year changes comply with certain requirements of the notice, like the required safe harbor notice content and the election opportunity conditions.

Following examples will help in understanding the permitted changes easily.

# Adding an age 59½ in-service withdrawal feature is allowed if an updated notice is provided prior to its effective date. Moreover, an additional election opportunity is also provided.

# The plan’s default investment fund for automatic deferral contributions under a QACA Safe Harbor plan is allowed to be changed provided an updated Safe Harbor notice is provided 30 days before the change is intended to be made. Also, an additional election opportunity is provided to the participants.

# The entry date for employees’ participation commencement, those meeting the age and service requirements, can be shifted from monthly to quarterly.  Since the plan entry date doesn’t fall under the required items on the Safe Harbor notice, there’s no need of an updated notice and additional election opportunity. However, the change must be informed to the employees as directed under the DOLs summary of material modification requirements.

Mid-Year Changes that are prohibited

Following is a list of prohibited mid-year changes that are not allowed to be made to a safe harbor 401(k) plan, unless the change is required by law:

  1. Increasing the required years of service in order to become covered in safe harbor contributions made under a Qualified Automatic Contribution Arrangement (QACA) safe harbor plan;
  2. Reducing the number of eligible employees or narrowing the group of eligible employees who qualify to receive safe harbor contributions;
  3. Changing the safe harbor plan type (for example, shifting from a traditional safe harbor plan to a QACA safe harbor plan); and
  4. Modifying the formula or the definition of compensation to determine matching contributions, when the changes increase the matching contribution amount, OR permitting the discretionary matching contributions.

What Effect this New Law will Put on Plan Sponsors?

With the mid-year changes made possible, plan sponsors with safe harbor 401(k) plans are now given an opportunity to make required adjustments to their plans, without having to wait until next year. Also, the plan sponsors, who were previously reluctant in adopting safe harbor plans due to the inflexibility of making mid-year amendments, may now consider a safe harbor plan as an appropriate choice.

Effective Date

The IRS Notice 2016-16 is effective for those mid-year changes that are made on or after January 29, 2016.