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Protective Refund Claims for ACA-Related Income Taxes

Earlier this year, the U.S. Supreme Court recently announced they would hear a case that challenges whether the individual mandate under the Patient Protection and Affordable Care Act (ACA) is constitutional. It is possible that if the mandate is ruled to be unconstitutional, incomes taxes established under the ACA may effectively be repealed and any ACA-related income taxes paid in prior years may be refundable if a timely claim for a refund is filed. The Supreme Court will hear the case this fall and they are expected to render a decision by early 2021.

Income taxes established under ACA went into effect in 2013. These include the Net Investment Individual Income Tax (NIIT), which has a rate of 3.8% for certain net investment income of individuals, trusts and estates. Taxpayers must have both net investment income and modified adjusted gross income over the following thresholds for the NIIT to apply.

Filing Status	Threshold Amount
Married filing jointly	$250,000
Married filing separately	$125,000
Single	$200,000
Head of household	$200,000
Qualifying widower with dependent	$250,000

In addition, the ACA tax includes a .9% Additional Medicare Tax, which applies to individuals’ […]

By Linkenheimer LLP|2020-09-03T20:02:08+00:00July 31st, 2020|investment, irs, refunds, tax planning, taxable income|0 Comments

Even If No Money Changes Hands, Bartering Is A Taxable Transaction

During the COVID-19 pandemic, many small businesses are strapped for cash. They may find it beneficial to barter for goods and services instead of paying cash for them. If your business gets involved in bartering, remember that the fair market value of goods that you receive in bartering is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties.

For example, if a computer consultant agrees to exchange services with an advertising agency, both parties are taxed on the fair market value of the services received. This is the amount they would normally charge for the same services. If the parties agree to the value of the services in advance, that will be considered the fair market value unless there is contrary evidence.

In addition, if services are exchanged for property, income is realized. For example, if a construction firm does work for a retail business in exchange for unsold inventory, it will have income equal to the […]

By Linkenheimer LLP|2020-09-03T20:02:13+00:00July 20th, 2020|business, credit, irs, tax planning, taxable income|0 Comments

Conduct A “Paycheck Checkup” To Make Sure Your Withholding Is Adequate

Did you recently file your federal tax return and were surprised to find you owed money? You might want to change your withholding so that this doesn’t happen next year. You might even want to do that if you got a big refund. Receiving a tax refund essentially means you’re giving the government an interest-free loan.

Withholding changes

In 2018, the IRS updated the withholding tables that indicate how much employers should hold back from their employees’ paychecks. In general, the amount withheld was reduced. This was done to reflect changes under the Tax Cuts and Jobs Act — including an increase in the standard deduction, suspension of personal exemptions and changes in tax rates.

The tables may have provided the correct amount of tax withholding for some individuals, but they might have caused other taxpayers to not have enough money withheld to pay their ultimate tax liabilities.

Review and possibly adjust

The IRS is advising taxpayers to review their tax situations for this year and adjust withholding, if appropriate.

The tax agency has a withholding calculator to assist you in conducting a paycheck checkup. The calculator reflects tax law changes in areas such as available itemized […]

By Linkenheimer LLP|2020-09-03T20:02:15+00:00July 15th, 2020|child, deduction, deductions, individuals, irs, tax planning|0 Comments

After You File Your Tax Return: 3 Issues To Consider

The tax filing deadline for 2019 tax returns has been extended until July 15 this year, due to the COVID-19 pandemic. After your 2019 tax return has been successfully filed with the IRS, there may still be some issues to bear in mind. Here are three considerations.

1. Some tax records can now be thrown away

You should keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return. So you can generally get rid of most records related to tax returns for 2016 and earlier years. (If you filed an extension for your 2016 return, hold on to your records until at least three years from when you filed the extended return.)

However, the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.

By Linkenheimer LLP|2020-09-03T20:02:19+00:00July 7th, 2020|irs, tax, tax deadlines|0 Comments

Steer Clear Of The Trust Fund Recovery Penalty

If you own or manage a business with employees, you may be at risk for a severe tax penalty. It’s called the “Trust Fund Recovery Penalty” because it applies to the Social Security and income taxes required to be withheld by a business from its employees’ wages.

Because the taxes are considered property of the government, the employer holds them in “trust” on the government’s behalf until they’re paid over. The penalty is also sometimes called the “100% penalty” because the person liable and responsible for the taxes will be penalized 100% of the taxes due. Accordingly, the amounts IRS seeks when the penalty is applied are usually substantial, and IRS is very aggressive in enforcing the penalty.

Far-reaching penalty

The Trust Fund Recovery Penalty is among the more dangerous tax penalties because it applies to a broad range of actions and to a wide range of people involved in a business.

Here […]

By Linkenheimer LLP|2020-09-03T20:02:20+00:00July 7th, 2020|business, income tax, irs, social security, tax planning|0 Comments