Tax Update March 2014
If
you have a flexible spending account (FSA) to set aside pre-tax dollars to pay
for out-of-pocket medical expenses, you’ll be interested in this latest FSA
change. Employers can modify these plans to allow up to $500 of unused amounts
at year-end to be carried over into the following year. Now health FSAs can
either have a 2½ month grace period or the $500 carryover to help alleviate the
forfeiture of unspent set-asides at year-end.
· A rule affecting the taxation of tips went into
effect this year. Restaurants often add an automatic gratuity to the bill for
large parties. If these amounts were treated as tips, they would be paid to
restaurant workers along with their other tips, and the workers would be
responsible for reporting them as income to the IRS. Now the IRS says
“automatic gratuities” will be treated as a “service charge” which, like
regular wages, will be subject to withholding by the employer.
· In mid-February, the Treasury Department
issued rules that delay until 2016 the employer mandate to provide health
insurance for employees for companies with 50 to 99 workers. To benefit from
this extension, employers must certify that they have not laid off employees in
order to come under the 100 employee threshold.
· Partnerships and other “pass-through” entities
should be ready for increased scrutiny by the IRS this year. According to the
IRS, the increasing number and complexity of pass-through entities makes these
business forms candidates for audit focus in 2014.
· The IRS is again issuing warnings about tax
scams. In the latest phone scam, the caller claims to be from the IRS reporting
taxes due which must be paid immediately with a pre-paid debit card or wire
transfer. Individuals who don’t pay up are threatened with arrest or loss of
driving or business licenses. Don’t respond in any way to these scams; instead
forward the e-mail to phishing@irs.gov.
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