Do These Key Tax Developments Affect You?
Johnson Price Sprinkle PA (JPS), a leading CPA, tax accounting firm in Western North Carolina with offices in Asheville, Boone and Marion, NC, provides innovative financial solutions created specifically for small to mid-sized, closely-held and family-owned businesses. JPS shares the following as a summary of several key tax developments that occurred in the past three months that may affect you, your family, your investments, and your livelihood.
Date extended for employers to claim revived work opportunity tax credit
The work opportunity tax credit allows employers who hire members of certain “targeted groups”, including unemployed veterans, ex-felons, food stamp recipients and several more, to get a credit against income tax. This credit was retroactively revived by the Protecting Americans from Tax Hikes Act of 2015. The previous transitional relief for eligible employers who want to claim the credit has been extended. The transitional relief now gives employers three extra months, until Sept. 28, 2016, to file the forms necessary to claim the credit for certain eligible workers. An employer that hires a member of a targeted group, including a long-term unemployment recipient, who begins work for that employer on or after Sept. 1, 2016, is not eligible for this transition relief with respect to any such new hire.
ACA premium credit and individual mandate 2017 indexing adjustment
The IRS has provided indexing adjustments for the premium tax credit beginning in 2017. These inflation-adjusted percentages are used to determine whether an individual is eligible for affordable employer-sponsored minimum essential coverage (and thus ineligible for the premium tax credit to help afford health insurance purchased through an exchange). It will also help to determine whether an individual is eligible for an exemption from the individual shared responsibility payment because of a lack of affordable minimum essential coverage.
The IRS has also provided indexing adjustments relative to the requirement to maintain minimum essential coverage, referred to as the individual mandate (also called the individual shared responsibility payment) for 2017. Taxpayers are not treated as receiving employer-sponsored minimum essential coverage if their own out-of-pocket contribution exceeds 9.69% of their household income for plan years beginning in 2017 (up from 9.66% for 2016).
Social Security wage base could increase to $126,000 for 2017
The Social Security Administration’s Office of the Chief Actuary (OCA) has projected, under two out of three of its methods of forecasting, that the Social Security wage base will increase from $118,500 for 2016 to $126,000 for 2017. Based on the OCA estimate, on a salary of $126,000 (or more), an employee and his employer each would pay $7,812.00 in Social Security tax in 2017. Based on the OCA estimate, a self-employed person with at least $126,000 in net self-employment earnings would pay $15,624.00 for the Social Security part of the self-employment tax in 2017.
No deduction for clothing
The Tax Court held that a salesman for a major designer who was required to wear the designer’s apparel while representing the company couldn’t deduct the cost of such clothing as unreimbursed employee expenses. Clothing worn by a taxpayer in connection with his trade or business is generally nondeductible, unless the clothing is required or essential in the taxpayer’s employment, or the clothing is not suitable for general or personal wear and the clothing is not so worn. Here, the clothing was clearly suitable for regular wear. © 2016 Thomson Reuters/Tax & Accounting. All Rights Reserved
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Have concerns about how these tax developments will affect you? Contact JPS.
Asheville Boone Marion
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About JPS:
At JPS, everything we do is about improving the lives of clients, people, community and profession by providing innovative resources and financial solutions. Our team is dedicated to learning the intricacies of your business, whether you’re a small operation, a nonprofit organization or a large corporation, and, whether your business is in its infancy or already well established. We also invest time and energy in our community, taking pride in doing what we can to make Western North Carolina a better place to live and work. Our Mission is to Be Greater by improving the financial lives of our clients while strengthening our community.
