Please feel free to read our client newsletter. It is provided to keep you up to date on the latest tax and accounting news.
H appy Independence Day! While we look forward to the fireworks that mark the month, there could be fireworks for millions when the IRS tries to take back health care Premium Tax Credits at the end of the year. If you are using the Health Exchange for your insurance you will want to be aware of this tax risk. There is also news on two other fronts, first the newly announced Taxpayers' Bill of Rights and potential payment relief for those with student loan debt. All this and an article exploring the status of home affordability round out this month's newsletter.
- Prepare for the 'Claw Back' Credit
- Taxpayer Bill of Rights
- In the News. Student Loan Interest Relief?
- Ideas to Make Homeownership Affordable
Prepare for the 'Claw Back' Credit
Is a tax surprise of over $1,000 in your future?
Millions of taxpayers may see a surprising tax bill in 2014 as the Federal government asks them to repay (claw back) some or all of the new health insurance Premium Tax Credit claimed on the Affordable Care Act insurance exchanges. Could this impact you or someone you know? If so, here is what you need to know.
A core part of the Affordable Care Act (ObamaCare) was the establishment of a Health Insurance Marketplace where the uninsured shop and sign up for health care insurance. Some states created their own online system while other states opted for the Federal website known as the Federally-facilitated Marketplace (FFM). When using the Marketplace, qualified participants could apply a new insurance Premium Tax Credit to reduce their health insurance bill. Millions of taxpayers are receiving this tax credit each month. The credit can be paid directly to health insurance companies to reduce monthly health insurance premiums.
The Insurance Premium Tax Credit Problem
Per a recent report from the Department of Health and Human Services, over 85% of the eight million participants who selected health insurance in the new Marketplace tool are using the new Premium Tax Credit to help pay their monthly premium. The qualifications to receive the tax credit are based on self-reported income. The contractor hired by the government to audit this information (Serco) is reporting over 4 million discrepancies between what is claimed on the insurance enrollment to qualify for the tax credit and what can be found in government records about these individuals. The problems consist of:
If you are currently receiving your health insurance through these new exchanges and have been using the Premium Tax Credit to reduce your premium, please consider the following;
The government is currently trying to work through the reported inconsistencies on enrollment forms. Should you receive notice from the government please ask for help. The financial impact of waiting could cause an unpleasant surprise at tax time.
Taxpayer Bill of Rights
In June, the IRS announced the adoption of a Taxpayer Bill of Rights. The ten rights are highlighted here for your information. These rights have been in the tax code for years, however per Nina Olson head of the IRS Taxpayer Advocate Service,
"...taxpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS and even fewer can name those rights."
The IRS hopes that by centralizing and publicizing these rights, taxpayers will become more aware. How might this impact your experience with the IRS? That is anyone's guess as it is not covered in the IRS Bill of Rights announcement.
In the News. Student Loan Interest Relief?
|With student debt loads now over $1 trillion and rising, any relief is a welcome one for students. Especially since over 71% of students leave college with some debt.|
|In a recent presidential executive order, qualified student borrowers of Federal Direct Loans can cap their monthly loan payments to 10 percent of discretionary income. The goal is to make this repayment option available by December 2015. The government is also going to focus on improving communication to holders of student loan debt to better outline the many available repayment options.|
|Remember, those with student loans can also reduce their taxable income in 2014 by up to $2,500 in qualified student loan interest payments.|
Ideas to Make Homeownership Affordable
Much is being written about how it is becoming harder to purchase a first home. Is home ownership out of reach?
For years the values of homes kept going up with no visible ceiling in sight. Then came the 2008 recession and housing market collapse. While housing prices adjusted downward, the ability to obtain financing became much more difficult. Added to this problem was the increased difficulty of potential young home-buyers to make ends meet while carrying significant debt loads from college. While the housing market has now rebounded and interest rates are low, the median household income has not risen much to help take advantage of the home buying opportunity.
Ideas to make home ownership more affordable
Given the difficulty to own your first home, here are some ideas to consider to make your dream a reality.
Please contact us with any questions.
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