2017 National Income Tax Workbook™ - Home | Farm Office · 2017 National Income ... not exclude...
Transcript of 2017 National Income Tax Workbook™ - Home | Farm Office · 2017 National Income ... not exclude...
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Individual IssuesChapter 10 pp. 328-3902017 National Income
Tax Workbook™
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Individual Issues p. 327
1. Affordable Care Act
2. Net Investment Income Tax
3. Sharing Economy
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Affordable Care Act p. 328
All US individuals must:
1. Have qualifying health insurance,
2. Qualify for a coverage exemption,
3. Make an individual shared responsibility payment (ISRP)
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Individual Shared Responsibility Payments (ISRP) p. 328
Coverage exemption - Form 8965 No coverage exemption - ISRP▪ Worksheet in Form 8965 instructions▪ 2017 flat dollar amounts
• $695 per adult & $347.50 per child Birth/adoption/death can = full-year No real enforcement by IRS
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Silent Returns p. 329
Silent = Return with no health coverage information
As of October 2017 - IRS will reject (as in prior years)
Law requires information on return
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Reporting Minimum Essential Coverage (MEC) pp. 329 - 330
MEC reported on F1095 series
Catastrophic plans – qualifies as MEC▪ Does not qualify for Premium Tax
Credit (PTC)
Qualified small employer health reimbursement arrangement (QSEHRA)▪ Employer will issue Form 1095-B
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Alternative Proof of MEC pp. 330 - 331
Insurance/Medicare card Form W-2/pay stub showing deduction Explanation of benefits Insurer statement Medical bill showing insurance reimb. Employer document/statement Record of Advanced payments of PTC
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Coverage Exemptions pp. 331 - 333
Exemptions - Figure 10.3 (pp. 332-333)
Use Exemption H if:▪ Birth/adoption/death during the year and▪ Coverage exemption claimed for after
birth/adoption or before death
Affordability of Marketplace insurance8.16% for 2017 8.05% for 2018
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Premium Tax Credit (PTC) p. 334
Marketplace policies only If household income (HHI)100% - 400%
Federal Poverty Level (Figure 10.4) N/A if employer coverage affordable▪ Self-only cost > 9.69% HHI (9.56% 2018)
Advanced PTC reconciled Form 8962▪ Limit on repayment based on income▪ Must reconcile to get advanced again
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Opt-out Paymentspp. 335 - 336
Employee: ▪ Unconditional opt-out or▪ Conditional & employee meets conditions
Employer: ▪ Plan > 12/16/15 → part of employee cost▪ Others → in employee cost after regs final
Form 1095-C, line 15, may be understated
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Net Investment Income Tax (NIIT) Overview p. 336
$250,000 Married Filing Jointly$125,000 Married Filing Separately$200,000 Single$200,000 Head of Household$250,000 Qualifying Widow(er)
3.8% x lesser of: 1) Net investment income OR2) Modified adjusted gross income
over the threshold amounts:
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Investment Income/Gain p. 337
Interest
Dividends
Annuities
Royalties
Rents
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Net Gains subject to NIIT p. 337
Gain from sale of stocks, bonds, or mutual funds
Gain from sale of property not held in a trade or business
Gain from sale of Partnership or S corpinterest
Gain from investment of working capital
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Items Not Subject to NIIT p. 337
Subject to SE tax Wages Unemployment compensation Social security benefits Alimony Tax-exempt interest
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Items Not Subject to NIIT – cont’d p. 337
Distributions - certain retirement accts
Items excluded from gross income
Nonpassive activity prop sold at gain
Trading activity
Income from a nonpassive activity
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Deductions for NIIT p. 337 - 338
Allocable to rent/royalty income Allocable to trade or businesses
subject to NIIT Savings early withdrawal penalties
allocable to income subject to NIIT NOL allocable to NIIT income Allocate with “reasonable method”
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Deductions which may need to be allocated p. 338
State & local income taxes Investment interest expense Investment advisory and brokerage fees Rental/royalty related expenses Expenses related to tax issues Expenses incurred by estate/trust
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Real Estate Professionalsp. 338
Being a Real Estate Professional does not exclude rental income from NII
Exclude if:1. Participated > 500 hours current year or
> 500 hours 5 of last 10 years2. Can show rental activity is in ordinary
course of a trade or business
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Grouping Activities to Avoid NIIT p. 339 Activities = appropriate economic unit▪ Similarities/differences▪ Extent of common control▪ Extent of common ownership▪ Geographical location▪ Interdependencies between activities May regroup in 1st year subject to NIIT
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NIIT CalculationIndividuals pp. 339 - 340 File on Form 8960
Applies US citizens and residents
Special Rule for Nonresident spouse▪ If elects to file jointly & does not elect
joint for NIIT, MFS threshold applies
Subject to estimated tax provisions
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NIIT for Estates and Trustspp. 340 - 341
3.8% of lesser of▪ Undistributed new investment income or▪ Excess of AGI over dollar amount at which
highest tax bracket begins ($12,500 for 2017) File on Form 8960
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Sharing Economy Platformsp. 341
Online platform connects buyers/sellers
▪ Lyft or Uber▪ Airbnb or VRBO▪ Etsy and Thumbtack
Employee vs Independent Contractor?
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Reporting & Payment Requirementspp. 341 - 342
Income reported on 1099’s
Estimated tax payments
▪ Owe ≥ $1,000 after credits/withholding
▪ Withholding & credits < smaller of:
1. 90% of tax shown on the tax return
2. 100% of prior year tax
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Estimated Tax Penalty & SE Tax p. 342
Estimated tax penalty exceptions:▪ No payment due to casualty, disaster▪ Retired > 62, or became disabled and had
reasonable cause Self-employment tax▪ 15.3% on first $127,200▪ 2.9% on amounts over $127,200 .9% Medicare tax if > threshold
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Business Expensespp. 343 - 344
Business use of home▪ Principal place of business▪ Place to meet patients, clients, customers ▪ Separate structure ▪ If sole fixed location, storage space
Actual expenses – Form 8829
Simplified method - $5/sq ft up to $1,500
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Thank You