Tax Levies Can Be Lifted If you Act Swiftly

Tax Levies

Tax Levy Chandler
If you owe back taxes, the IRS can use a levy in order to seize your property in order to satisfy a tax related debt. These do not require permission from the courts, and may be carried out by any means necessary. Levies may result in wage garnishment, seizure of money from financial accounts, and the seize and sale of real estate, vehicles, and other personal items. Finding out that you are being levied by the IRS can be emotionally and physically stressful, but it is crucial to act immediately if you hope to have a levy lifted.

Levy Notification

When you receive a notice from the IRS, it is important to read it in full. If you are unsure of the nature of a notice, an accountant with LBS Tax can aid you in identification and help you to determine your next course of action.

  • Small business owners – Receive 5 notices in total. These are comprised of 4 standard notices and 1 final notice.
  • Individuals – Receive 4 notices in total. These are comprised of 3 standard notices and 1 final notice.

Your final levy notice is your last chance to act.

The final warning given by the IRS regarding a tax levy will be a bill titled “Final Notice of Intent to Levy and Notice of Your Right to A Hearing.” This will have a date on it, and you will have exactly 30 days from the Final Notice of Intent to Levy to file a Form 12153 and have it received by the IRS. You do not have 30 days to file. The IRS must receive your Form 12153 within 30 days of the specified date on your final notice.

Prevent a Levy with a Request for a Collection Due Process

By filing a Request for a Collection Due Process or Equivalent Hearing (Form 12153) you can preserve your right to go to court. You must make sure to check box 7 on the form and there must be a reason supplied for your disagreeing with the levy.

An Enrolled Agent can represent you before the IRS.

Tax Levy Chandler AZ
Our accountants can look at your finances and identify your best options. Our company president, Sharon A. Lewis, is also an Enrolled Agent. She can represent you before the IRS. After a request for a collection due process you will have the time to discuss options with the Collection office that sent your notice. If a compromise can be reached or the levy has been assigned in error, a hearing may not be required.

Collections Appeals

The Collection Appeals Program is available even after a seizure.

If a hearing is required it will go through the Office of Appeals. This may occur over the phone, via physical or electronic letter, or in person. An Enrolled Agent can represent you during your Appeals hearing. The collection appeals program is used for a number of reasons including agreement terminations, rejections, and modifications. It does not guarantee the IRS will act according to the wishes of the individual, but does provide the opportunity to appeal either before or after a notice, levy, or seizure.

An accountant can make all the difference.

Depending on where you are in the levy process, certain options will be available to you. We know every step of this process including obligations the IRS has to you and when and how you can respond. Taking advantage of every step in the process is the best way to prevent a levy, and ensure you have the greatest opportunity to prove it was wrongfully made or present a payment alternative that is more favorable for you than seizure of your assets.

If you’ve received a levy notification or your property has already been seized, call (480) 664-1249 or Contact Us today. You have options, and we can help you put them to use.

Reward yourself with proper retirement preparedness

Retirement Preparedness

Retirement Plan Chandler
Preparing for retirement can help you to live the post-professional life you want. There are a number of important considerations to make before you do so though. Visiting with an accountant can help you identify your total-post employment income, including social security benefits and how long any 401K and IRA accounts will last with a specified budget. Retirement is a time to relax and enjoy yourself, preparing for it before you retire ensures relaxing is all you’ll need to worry about.

Social Security Benefits

Social security benefits can be claimed any time after age 62, but full benefits are not available until the age of 67. After 70 benefits do not increase, and there is no further benefit you may gain by waiting to accept them. The maximum reduction to benefits occurs at age 62, this is a percentage of the maximum amount of benefit that can be received at age 67.

  • Reach age 62 in 2015 – Maximum reduction is 25%
  • Born after 1959 – Maximum reduction is 30%

For example, if you retire at age 62 and receive $1000 in benefits, for those who reach age 62 in 2015 this number would have increased to $1333 at age 67. For those born after 1959 who wait until age 67 to retire it would increase to $1430.

Working through retirement

Retirement Plan Chandler AZ
Many people just aren’t prepared to retire at age 62. There are many reasons for this, and if that is the case you can continue to work and contribute to a retirement plan. This allows you to retire at a later age and receive full benefits without attached reductions.

Delaying retirement increases benefits for every month they are delayed between 67 and 70. Medicare can still be utilized at 65.

Collecting a spouse’s retirement benefits

You don’t have to have worked under Social Security to receive benefits if your spouse has. If you have been married to anyone for 10 years or longer you could collect ½ of the amount they are entitled to at 62 from social security and it doesn’t affect what they collect.

When you are qualified to collect social security but below the full retirement age of 67, and have a spouse who is eligible for a higher amount, you may even collect a combination of benefits that is equal to the greater amount collected by your spouse.

If you are caring for your spouse’s child you can receive your spouse’s benefits no matter what your age is if the child is receiving benefits as well.

Speak to an Accountant

Social Security benefits and retirement can be complicated. You worked hard and contributed to Social Security for your entire life, and you deserve to the get the most from it. An accountant can analyze your finances and investigate your options to their fullest extent, identifying the best way for you to maximize benefits while living the life you want. Call (480) 664-1249 or Contact your local accountant in Chandler today to prepare for your retirement.

Business Mileage Deduction: Track it properly now, save a bundle later.

Business Mileage Deduction

Miledage Deduction Chandler
There are a variety of deductions you can claim on your taxes. For those who travel for business, it’s important to take them where and when you can. Business mileage deduction can really add up over the course of a year, and offers two ways to save. The options are:

Business Mileage Deduction Options

Standard Mileage Rate – The IRS provides a standard rate of 57.5 cents per mile. This deduction method is the easiest, only requiring accurate tracking of the mileage accrued.
Deduct Actual Expenses – This requires a detailed mileage log that must contain details like purchased gas, vehicle maintenance, and repairs. Page 27-28 of the IRS Travel, Entertainment, Gift and Car Expenses Guide details expectations and proper logging.

Tracking Options:

Hard Copy – Keeping a mileage log is a great analogue option. There are a variety of mileage log books available for purchase. This requires mindfulness though. You will have to remember to carefully track your mileage, and it may necessitate some re-training of vehicle habits.

Digital Copy – There are a variety of different software options. MileIQ is one of the most popular available. It can automatically detect when you enter your vehicle, and at the end of a trip you simply swipe in what the trip was used for. Options include business, personal, and medical. This is a convenient and accurate option.
Mileage Deduction Chandler AZ

What Qualifies for Business Mileage Deduction?

  • Office Travel – Movement between one office or work site and another is deductible.
  • Entertainment/Meals – Trips to meet vendors or clients for food or entertainment.
  • Errands – Picking up supplies, mailing post, and going to the bank.
  • Airport – Driving to or from the airport for a business related trip.
  • Temp Job Sites – Driving home to a temporary job-site of less than one year.
  • Odd Jobs – Driving to jobs such as lawn, pet, or child care can all qualify.
  • Customer Visits – Meeting a client at their job site or business.
  • Job Searching – Driving done while finding a new job in your occupation counts.

What Doesn’t Qualify for Business Mileage Deduction?

Commuting – When you are going to a permanent work location from your home it is considered commuting. A work location includes a principal place of business like an office, firm, company building, factory, etc. This includes any other place where you have or expect to work for over a year.

Working while Commuting – Actions like work related calls, listening to instructional tapes, or discussing work with employees or associates does not change the trips status from commuting. Meeting with a client at your personal office is also still considered commuting.

Special Exemptions:

Home Office – Having a home office as a principal place of business or where most income, administrative, or management tasks are performed allows for deductions from home to a client’s office, business seminar, or to a second office. This is because the commuting rule is negated when no commute to your office occurs.

Temporary Work Location – This includes travel to any location you expect to realistically work for less than a year. There are no exemptions if this location is outside your metropolitan area. If it is within it only applies to a regular work location away from home or an outside office.

Always Remember 3rd Party Verification

If a taxpayer cannot provide written proof of mileage and supporting evidence to back it up the tax court will disallow the deduction. It’s recommended that taxpayers get an oil change and/or a tire rotation at the end of the year or in early January. This shows 3rd party verification of mileage driven. Keep receipts from oil changes and tire rotations to back claims. These should be kept with their tax documents. If a taxpayer is without copies, they may request them from a mechanic.

Now that you know how and when to track business mileage deductions, you may need an accountant during tax time. Call (480) 664-1249 or Contact Us today for tax filing, business consulting and much more.

Saving Money with AZ Tax Credits

AZ Tax Credits

People donate far more money than they realize. Charities, tuition programs, schools, private organizations, and even spring cleaning yield opportunities for donation. It’s easy to discount them. Your child’s school fundraiser in September. A cash donation to the state military relief fund in December. Spring garage sale proceeds to the TANF. Individually they may not look like much, but they can really add up in the long run.

Cash donations to schools, private organizations, qualifying charities, and tuition organizations in Arizona can significantly reduce your taxes with credits. It provides two-fold by reducing what you owe Arizona in taxes and giving you an advantage on your federal tax return. A federal reduction only occurs if you itemize your deductions though, so keep all of your donation receipts in one place.

A Charitable Financial Reward

Let’s look at an example. A married couple with a combined income of $82,600 is filing jointly. They’ve already filed $20,000 in non charity related Schedule A deductions. We’ll look at what they owe in taxes with and without charity related Itemized Schedule A deductions.
Charitable Donation Image
In our example, itemized charity related donations for the couple totaled $1,600 dollars for the year. If you’ll look at the Arizona Credits row you may have noticed that without contributions their credits were 0. With contributions their credits equaled the amount they donated to charity.

This is because charitable contributions provide Arizona tax credits at a 1 to 1 ratio. Donate a dollar, claim it, and you now have a one dollar tax credit. These can be used at that very same 1 to 1 ratio to reduce the taxes you owe to Arizona. Donate a dollar, claim it, and now you pay one dollar less to Arizona when your taxes are due. Best of all, credits roll over. If you accumulate more than the total dollar amount in taxes you owe the state of Arizona, they will automatically carry over into next year’s taxes.

Since charitable donations reduce the taxes you owe the IRS, our couple was also able to save an additional $240 dollars on their federal taxes as well. There are 4 different tax credit opportunities available to individuals that provide Arizona tax credits.

Available Tax Credits

  • Temporary Assistance to Needy Families (formerly the Working Poor)

    A complete list of applicable charities can help you determine where you would like to donate your money. The maximum contribution for this tax credit is $400 for a married filing/jointly and $200 for a single individual.

    Beginning in 2013, those who contribute to a foster care agency can donate an additional $400 as a married filing jointly, or $200 for an individual. Itemized deductions are not necessary in order to claim a credit for contributions to a qualifying charitable organization or qualifying foster care charitable organization.

  • Arizona Military Relief Fund

    This credit helps assist Arizona military families in times of need. It helps families of Arizona service members who are currently deployed, have been injured or killed while fighting the Global War on Terror, or are facing hardship caused by their deployment. They can receive assistance to ease any financial crisis they may encounter. This fund caps at 1 million dollar so make sure it still accepting donations before donating. The maximum contribution for this tax credit is $400 for a married filing/jointly and $200 for a single individual.

    A second contribution can be made to a Private school tuition organization. That additional contribution can be $1064 for a married filing/jointly and $532 for a single idnividual

  • Arizona Private School Tuition Credit

    Anyone may claim a credit for a donation to a school tuition organization for scholarships to private schools. The maximum contribution for this tax credit is $1070 for a married filing/jointly and $535 for a single individual. If you maximize your contribution an additional credit becomes available. Although you cannot decide to whom the money will go, you can suggest an individual. If they are new to the school they may qualify for a tuition reduction.

  • Contributions and fees paid to Arizona Public Schools for extracurricular activities or character education programs and new for 2015 fees paid for testing

    This is available to filers who payed fees directly to Arizona public or charter schools for the support of extracurricular activities. This includes school sports. As of 2015 it also includes testing fees. The maximum contribution for this tax credit is $400 for a married filing/jointly and $200 for a single individual.

If you add up the maximum potential for tax credits it comes to a total of $3734 for a married filing/jointly and $1867 for an individual before additional credits are earned with an Arizona Private School Tuition Credit maximization. With the carry over you could easily cover your Arizona state taxes this year and into the next.

If you need help determining your tax deductions, tax planning, or other accounting needs don’t hesitate to schedule an appointment with LBS Tax.

Tax Tips for the Recently Married

Love and Taxes

Tax Accountants Chandler AZ
With wedding season in full swing, many newlyweds are off on their honeymoons with tax season likely to be the last thing on their minds. Though very few couples will consider the ramifications of marriage for filing purposes before it occurs, many forget to consider it afterwards. Knowing how to prepare before April 15th, 2016 can make the transition much easier, and help ease the joining of two lives in the eyes of the IRS. Keep these things in mind and you won’t have any undue considerations next tax season.

Tax Tips for the Recently Married

  • Remember your filing type – Now that you are married, you can no longer file as an individual. Options include:
    • Married Filing Separately – Since Arizona is a community property state, those who are married may file separately using a married filing separately form. This will require adjustments for community property as well as a properly filed community property worksheet.
    • Married Filing Jointly – This is your most likely filing option and will generally provide the best outcome. Benefits often include a lower tax rate, higher deductions, and deductions for children. If neither spouse has any outstanding debts or defaults this is often the best filing option for those newly married.
    • Head of Household – This is not often a viable option for married individuals. A tax accountant can help you identify whether you can file yourself or another as head of household as a married individual.

    Tax Accountant Chandler AZ

  • Adjust your W-4 – Since your income has joined with your spouse’s in the eyes of the IRS, your tax liability has now changed. Depending on who is working and how much they are earning this can have a positive or negative effect. Increasing your W-4 allowances may be beneficial if your tax liability has lowered as it will give you a greater income in the present. If you and your spouse make a significant amount, decreasing allowances may benefit you. When you lower allowances the IRS will withhold more money yearly, and you will reduce the likelihood you may need extra money set aside for taxes and likely receive a greater return.
  • Notify the IRS – If your name has been affected you must notify the social security administration. They will have to process changes and notify the IRS before you are able to file a new tax return. You will want to do this well before the deadline so that you have adequate time to wait until the name change is through before filing.
  • Update Insurance – Adjusting this is just as important as adjusting you W-4 when it comes to avoiding unfortunate surprises if you use the government or state marketplace for health insurance. If your income has changed or you have moved to a new state, your subsidies may be affected. Ensuring you have the right information in place will mean you won’t be over subsidized come tax time and will not have to pay back any money you were unaware of owing.

Now that you are prepared for those post wedding bell tax returns, you may need help from a reliable accountant in Chandler, AZ. With experienced, knowledgeable accountants on staff and an enrolled agent who can represent you before the IRS, call (480) 664-1249 or Contact Us today for all your tax needs.

Identity Theft and you: Protecting yourself in the digital age

Identify Theft

Data Theft
With more and more of our information on-line through social media outlets, and companies going digital, it can be easy to forget that digital space doesn’t operate under the same rules that physical space does. If someone wants access to physical documents they have to be present. Keeping important documents in your home feels safer, because its fairly easy to keep track of who is in your house. We advise keeping important physical documents in a safety deposit box, but the concept is sound. Physical space is easier to control and has natural barriers and limitation. Why is it then, that so many people treat digital space the same way? Important documents are kept in files on their desktop, or freely given to one another through email.

When you give away those documents without taking any security precautions you’re taking a huge risk. Though you may feel secure on your own network, you don’t know what the practices of the other individual are. Do they take any precautions? Is their network encrypted and password protected? Do they save documents haphazardly and often work from coffee shops, using unprotected WiFi connections? What happens if someone steals their computer, or your computer? Is there anything keeping them from having instant access to items like your tax filing number, social security number, and other commonly used identifiers? At LBS Tax we want you to be safe and secure no matter where you are. Take these simple digital safety precautions and you’ll be better prepared.

Easy tips to help stop identify theft

Security Lock

  1. Password Protection – The easiest and first step is password authentication. You want to have this enabled on any devices you own and your personal network. When you use public networks a VPN service can provide security when the network is lacking. There are many sites that offer tips on creating a strong password. The goal should always be to make something hard to guess but easy to remember. This leads us to encryption.
  2. Encryption – Sometimes you want to save specific documents. These can be for tax purposes or others, but with digital documentation eclipsing the physical you need a safe way to do it. Encrypting your documentation can provide a large measure of security and is offered by many companies. One common and free program is WinRaR. This will compress files into an encrypted package and you can even set a password limit. That means if the password is incorrectly guessed the file will corrupt, though it will not keep someone from copying the file before guessing.
  3. Sharing – One of the easiest ways to stay safe is to restrict your sharing. Don’t email important documents to people you do not know, do not email unencrypted documents, do not store documents on publicly accessible spaces. Emailing files is not a secure process. They can be intercepted or a mis-typed address can put your documents in a strangers hands. It’s easier and easier for information to get loose, and once it is it can be very difficult to put a cap back onto it. By regularly protecting yourself and restricting informational flow you’ll be one step ahead of the game if something does go wrong because you will know how and when access occurred.
  4. Firewalls & Updates – Lastly we have firewalls and updates. You’d be surprised how many updates occur to address security fixes. When these issues come up it’s because a hacker has found a loophole in security. Failing to update these programs can lead to a hole in your own system that is easy to exploit. Always have a trusted firewall program activated, and you can even check security settings to see what programs are able to access the internet.

As expansive as technology is, old school methods are always easiest. Protect your social media accounts, do not release information to strangers or believe they are who they say they are without proof. If you ever receive a strange incoming call asking for personal information it is best not to give any. Ask for a first and last name, ask for an extension, ask which company they work for and what number you can call them back at. Then go online, verify this number, and return the call. If the number is different, call the number from the company site and get transferred to the employee from the company operator. It’s a great way to ensure someone works for the company they have stated they do. Protect yourself, protect your tax information, and call (480) 644-1249 or contact LBS Tax for a security conscious accountant in Chandler, AZ.

Saving big on property sales tax with a 1031 Exchange.

The IRS loves collecting taxes, and if you don’t do your homework, they’ll gladly take your money whenever possible. Any accountant will tell you they can’t count the number of times clients have come in to meet with them after a major transaction. In many instances this doesn’t have an effect on their filing, but in some instances, it can cost them dearly. When you’re preparing to sell a property, meet with an accountant first. That small meeting can save you big in the long run, especially when you are using proceeds to re-invest. This is never more true than with a 1031 exchange.
1031 Exchange Tax Chandler

What is a 1031 Exchange?

When you buy or sell a property or business for a gain, you are required to pay taxes on it when you sell it. This tax occurs at the time of the sale, unless you plan to reinvest. There are certain properties that are considered similar to the one you sold. Selling a condo you’ve been renting out in order to purchase a house for instance. In these cases the IRS will allow you to postpone paying taxes on the sold property. This is called a Like-Kind Exchange and exists under the IRC Code Section 1031.

These are not cut and dried transactions, and require the expertise of an experienced accountant in order to determine if the transaction falls under the code, and what the taxable structure will be. These like-kind property exchanges aren’t solely relegated to property, and an exchange can include non-like kind property, liabilities, and cash. In these instances partial taxation may be triggered. The matter is further complicated when a property is exchanged for one of lesser value.

Do I qualify for a 1031 Exchange?

The short answer is yes. Individuals, partnerships, C corporations, S corporations, trusts, limited liability companies, and others may all benefit from a 1031 Exchange. An accountant will be able to determine your specific case, and more importantly, whether or not the transaction itself qualifies.

Does my property qualify?

There are many considerations that determine whether or not your property qualifies. Factors include:

  • Property Use – Is the property for business use in any fashion or for residential use?
  • Property Nature – Are the properties similar enough to be considered alike in character?
  • Property Type – Is it real property like land, or is it personal property like a truck?

There are also restricted properties that include stocks, partnership interests, inventory, and several more. In addition, if a 1031 Exchange is not carried out in the correct order, the IRS may disqualify the entire transaction and demand immediate payment of taxes owed. This includes taking control of cash before an exchange is complete. Going over your transaction with an accountant beforehand assures that your 1031 Exchange will be in order. When a little time now can save you tens of thousands of dollars in the very near future, isn’t it worth it?

Before you sell your property, call (480) 664-1249 or contact LBS Tax for a 1031 Exchange Consultation in Chandler today.

What to bring for your Tax Preparation

Tax Preparation

Tax Preparation Chandler, AZ

Proper tax preparation is incredibly important. When you get tax preparation in Chandler, AZ it pays to be prepared. A good tax preparer is incredibly thorough. In order to provide you with the best service possible, specific documentation is needed. If you don’t have them, you’ll be required to retrieve them, and may even need rescheduling. So when you visit your tax professional in Chandler, AZ this tax season, make sure you bring everything on the list below.

Tax Preparation Necessities

  • Your previous year’s return – This carries much of the information your tax preparation specialist will need. It also gives them an idea of your previous years qualifications. If little has changed they can work with it, and keep from re-gathering necessary information while identifying new qualifications based on the old ones. If you have access to them, it is helpful to bring tax returns from the previous 3 years.
  • Your personal and any dependents information – You’ll need your personal information. This includes your social security card, taxpayer identification number and the social security number and information of any claimed dependents. If you’ve paid any alimony you will also want this amount along with the social security number and information of your ex-spouse.
  • Income Statements – Though regularly referring to your W-2, if you are self employed you would bring a 1099-MISC form. For those collecting unearned income, like retirements benefits, interest, or social security, each individual kind will come with its own 1099 statement. Income types for which you should bring proof include:
  • • Income from your employer
  • • Income from self-employment
  • • Retirement Income (IRA,Pension.Annuity)
  • • Income from Gambling
  • • Alimony
  • • Investment Income (Sale of Stocks, Interests, Dividends)
  • • Income from Rental Property
  • • Social Security Benefits
  • • Income Earned Abroad
  • • Royalties
  • • Prize or Award based Income
  • • AZ State Refunds
  • Expense Receipts – These are how a tax preparation specialist in Chandler, AZ gets you deductions. Without proof of expenses, they will be unable to claim any deductions. Deductions can be taken for certain things like:
  • • Expenses due to job hunting
  • • Charitable donations
  • • Expenses from self employment
  • • Business expenditures
  • • Specific medical expenses
  • • IRA contributions
  • • Union fees
  • • Certain foreign, local, or state taxes
  • Some expenses can net very large deductions. This is especially true when it comes to personal disasters, theft, and loss. If you’ve encountered a personal disaster make sure to bring in documentation of rebuilding expenses, clean-up costs, and lost property records.
  • Affordable Care Act Information – If you signed up for insurance through the AFA Marketplace, bring your 1095-A and any Marketplace exemptions you may have received.

Coming prepared for tax preparation in Chandler, AZ helps speed up your tax preparation process and aids your tax professional in getting you the most deductions and maximum refund. For masterful tax preparation from a highly experienced certified accountant, Call (480) 664 – 1249 or Contact LBS Tax today.

4 Ways a Tax Accountant can help your Bankruptcy Filing


Bankruptcy in Chandler, AZ
Bankruptcy in Chandler, AZ can happen to anyone. It seldom has to do with financial irresponsibility. It is most often due to job loss, illness, divorce, and other serious problems. You can exercise every available option. It still may not be enough. That’s when bankruptcy can be most beneficial. It’s meant to help you restart. A certified accountant can help you with areas your attorney may know little about.

4 Benefits to Including a Tax Accountant in your Bankruptcy Filing

  1. They can determine eligibility and discharges – When it comes to a bankruptcy in Chandler, AZ, it’s important to be absolutely sure about your tax discharge eligibility. There are a number of factors your Tax Accountant is well versed in. They can determine what you are able to discharge. This knowledge is crucial to receiving the largest tax discharge possible.
  2. They know exactly when you should file – Many attorneys will tell you they understand bankruptcy tax law. Unfortunately, not all of them are telling the truth. An oversight can end up substantially costing you. Tax Accountants not only know whether or not you are eligible for a tax discharge. They know when to file. Sometimes a matter of months can make all the difference in a filing.
  3. An Enrolled Agent can represent you to the IRS – An Enrolled Agent has the same authority before the IRS as a CPA or Attorney. That means they can speak to the IRS on your behalf regarding any taxes you may be eligible to discharge. This professional representation can mean the difference between a clean slate, and continued repayment.
  4. They can perform an offer in compromise – Sometimes the IRS is willing to work with you on re-payment. If you have a Tax Accountant versed in offers in compromise, your odds of successfully reducing or structuring your payments dramatically increase.

If you are considering, or have already begun filing for bankruptcy, don’t wait to Call or Contact LBS Tax. As your tax discharge expert for bankruptcy in Chandler, AZ, LBS Tax believes you deserve a fresh start, and they can help you get one.

Taxes and the Affordable Care Act

Taxes and the ACA

Tax Problems in Chandler, AZ
With the start of 2015, it is important to know what policy changes mean and how they can affect you personally. Taxes are one area no one likes to be surprised about. When it comes to the Affordable Care Act there are some notable changes that can negatively impact you if you aren’t prepared.

The Affordable Care Act was written into law in 2010 and requires every citizen get health insurance or receive a penalty. They can do so through employment, or using the federal or state run insurance marketplace. There are some benefits to going through the marketplace though. These include tax credit eligibility, and knowledge that the plan will meet a government approved minimum standard of coverage.

The Premium Tax Credit and You

You can receive the premium tax credit, which helps pay for your insurance through the marketplace if:

    • Your insurance was purchased through the marketplace.
    • Your household income falls within the range of eligibility, for example:
      • An individual is fully covered if they make $11,670 a year or less. They can receive a credit if they make up to, but not exceeding, $46,680.
      • A family of four is fully covered if they make $23,850 a year or less. They can receive a credit if they make up to, but not exceeding, $95,400.
    • You must not be able to get affordable coverage through your employee that meets the governments minimum value.
      • Plans offered by an employer are considered affordable if the annual premium you pay for yourself does not go above 9.5 percent of your household income.
      • Plans offered by an employer meet minimum value requirements if they cover at least 60 percent of expected total allowable costs for covered services.
    • You must not be eligible for government program subsidized coverage. This includes things like Medicare, TRICARE, and Medicaid.
    • You must not file a tax return as Married Filing Separately unless certain criteria are met.
    • You cannot be claimed as a dependent on someone else’s tax return.

If you meet these requirements, as many do, you will receive the premium tax credit. Do not forget to adjust your income and eligibility requirements whenever they change. At the end of the year this can have a drastic effect on your tax return. If you make more than stated you will be required to pay back some of the tax credit (which is applied monthly to the cost of your insurance premium).

What if you don’t get Insurance?

There are yearly flat fee penalties that will be carried out on your taxes. These work on a scale and are either a flat rate, or a percentage of your income depending on which is greater. In 2014 this was $95 per adult and $47 per child up to $285 in a household, or 1% of your annual household income. In 2015 this moves up to $325 per individual and $162 per child up to a household maximum of $975, or 2% of your annual household income. This will raise again in 2016.

There are Exemptions

There are a number of exemptions that can lower or even eliminate the tax penalty entirely. These are dependent on everything from financial hardships to religious affiliations. Your local tax professional can help you determine your exemption qualifications. There is a limited time to enroll for insurance under the Affordable Care Act, so don’t wait to contact your local tax professional and find out what is best for you.