by admin | Oct 20, 2022 | Blog
The IRS has announced the penalty amounts for failure to file correct 2023 information returns, and failure to furnish correct 2023 payee statements in 2024.
IRS Code 6721 imposes a penalty on a taxpayer for failing to file a correct information return (any 1099 series form or a Form W-2). Code 6722 imposes a penalty for failure to furnish a payee statement (employee’s copy of Form W-2, recipient’s Form 1099) on time, failure to include all information required to be shown on the statement or including incorrect information. The maximum penalty is lower if the taxpayer is a small business. A small business is a taxpayer with average annual gross receipts for the most recent three tax years of $5 million or less.
The amount of the penalty depends on when the return or statement is corrected.
- The penalty on 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, that are corrected within 30 days, is $60 per return/statement (currently $50), up to a maximum penalty of $630,500 ($220,500 for small businesses). The maximum penalty is $588,500 on 2022 information returns and payee statements ($206,000 for small businesses).
- The penalty on 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, that are corrected later than 30 days after the due date but before August 1st, is $120 per return/statement (currently $110), up to a maximum penalty of $1,891,500 ($630,500 for small businesses). The maximum penalty is $1,766,000 on 2022 information returns and payee statements ($588,500 for small businesses).
- The penalty on 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, that are not corrected by August 1 (or if no return or statement is filed at all), is $310 per return/statement ($290 for 2022 information returns), up to a maximum penalty of $3,783,000 ($1,891,500 for small businesses). The maximum penalty is $3,532,500 on 2022 information returns and payee statements ($1,177,500 for small businesses).
Intentional disregard penalty: The intentional disregard penalty for 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, is $630 per return/statement, or if greater, 10% of the amount required to be shown on the return/statement (without any limit on the maximum penalty in a calendar year). The intentional disregard penalty for 2022 information returns required to be filed in 2023, and 2022 payee statements required to be furnished in 2023, is $580 per return/statement, or if greater, 10% of the amount required to be shown on the return/statement (without any limit on the maximum penalty in a calendar year).
Lastly, for tax returns filed in 2023, the minimum penalty for failure to file a tax return within 60 days of the due date is $485 ($450 for tax returns filed in 2022).
Source: Thomson Reuters
by admin | Oct 10, 2022 | Blog
The IRS has issued a draft version of the 2022 Form 8941 (Credit for Small Employer Health Insurance Premiums). The draft 2022 instructions have not yet been released. Form 8941 is used by small businesses and tax-exempt organizations to calculate the small business health care tax credit when they file their 2022 income tax returns.
Background knowledge
The form was added by the 2010 Patient Protection and Affordable Care Act, which provides a sliding scale income tax credit to small employers with fewer than 25 employees. To qualify for the credit, an employer must pay at least 50% of the cost of health care coverage for its workers at the premium rate for an employee who has single coverage (as opposed to family coverage). Because the eligibility formula is based in part on the number of full-time equivalent employees (FTEs), not the number of employees, many businesses will qualify for the credit even if they employ more than 25 individual workers. In addition, the credit is applied against an employer’s income tax liability, rather than its employment tax liability. An employer may not reduce employment tax payments (i.e., withheld income tax, Social Security tax, and Medicare tax) during the year in anticipation of the credit.
The credit is computed on IRS Form 8941. Both small businesses and tax-exempt organizations will use the form to calculate the credit. Afterwards, small business will then include the amount of the credit as part of the general business credit on its income tax return.
Draft changes
One of the three requirements for a small employer to be eligible for the tax credit is the average annual wage paid per FTE. The draft notes that for 2022, the average annual wage paid per FTE must be less than $58,000 (increased from $56,000 in 2021). Line 3 of Form 8941 is where an eligible small employer should enter the average annual wages paid for the tax year (from Worksheet 3, line 3), which must be a multiple of $1,000.
The draft also notes that if an eligible small employer had more than 10 FTEs and average annual wages of more than $27,000, the FTE and average annual wage limitations will separately reduce the employer’s credit. This may reduce the employer’s credit to zero even if the employer had fewer than 25 FTEs and average annual wages of less than $58,000.
Source: Thomson Reuters
by admin | Sep 26, 2022 | Blog
The IRS has updated Notice 931 (Deposit Requirements for Employment Taxes) to include the tax deposit rules for the 2023 year.
The deposit schedule employers must use (i.e., monthly or semi-weekly) is based on the total tax liability they reported during the lookback period. For employers filing Form 941 (Employer’s Quarterly Federal Tax Return), an employer’s deposit schedule for 2023 is based on the lookback period beginning July 1, 2021 and ending June 30, 2022. An employer reporting $50,000 or less of Form 941 taxes for the lookback period is a monthly depositor, and an employer reporting more than $50,000 of Form 941 taxes is a semiweekly depositor.
An employer with a Form 941 tax liability of less than $2,500 during the current or preceding quarter, who does not incur a $100,000 next-day deposit obligation during the current quarter, is not required to make monthly or semiweekly deposits if the taxes are paid in full with a timely filed return. An employer accumulating a tax liability of $100,000 or more on any day during a deposit period must deposit the tax by the next “business day,” regardless of whether the employer is a monthly or semiweekly depositor. A “business day” is any day other than a Saturday, Sunday, or a “legal holiday.” The term “legal holiday” means any legal holiday in the District of Columbia.
The IRS considers a new employer’s tax liability to be zero, which makes a new employer a monthly depositor for the first year of business.
The lookback period for annual return filers (Forms 943, 944, 945, or CT-1) is the calendar year preceding the previous year. The lookback period for 2023 tax deposits is the 2020 tax year.
Adjustments: The lookback period is based on the tax liability as originally reported. If an employer subsequently files Form 941-X, 943-X, 944-X, 945-X, or CT-1X to correct errors on the original return, the corrections are not taken into consideration for purposes of the lookback period computation.
Source: Thomson Reuters
by admin | Sep 21, 2022 | Blog
A number of key tax figures are adjusted each year for inflation based on the average chained Consumer Price Index (CPI) for all-urban customers for the 12-month period ending the previous August 31. The August 2022 CPI summary has been released by the Labor Department. Using the chained CPI for August 2022 (and the preceding 11 months), here are the calculated 2023 indexed amounts.
Qualified transportation fringe benefits: For 2023, an employee will be able to exclude up to $300 ($280 in 2022) a month for qualified parking expenses, and up to $300 a month ($280 in 2022) of the combined value of transit passes and transportation in a commuter highway vehicle.
Long-term care premiums: Amounts paid for insurance that covers qualified long-term care services are treated as medical expenses up to specified dollar limits that vary with the age of the taxpayer at the end of the tax year. For 2023, the dollar limits will be:
- $480 for a taxpayer age 40 or younger ($450 in 2022)
- $890 for a taxpayer age 41-50 ($850 in 2022)
- $1,790 for a taxpayer age 51-60 ($1,690 in 2022)
- $4,770 for a taxpayer age 61-70 ($4,510 for 2022)
- $5,960 for a taxpayer age 70+ ($5,640 in 2022).
Payments received under qualified long-term care insurance: Amounts received under a qualified long-term care insurance contract are generally excludable as amounts received for personal injuries and sickness, subject to a per diem limitation, which will be $420 in 2023 ($390 in 2022).
Archer MSAs: For Archer medical savings account (MSA) purposes, in 2023, a “high deductible health plan” will be a health plan with an annual deductible of:
- $2,650 – $3,950 in the case of self-only coverage ($2,450 – $3,700 for 2022)
- $5,300 – $7,900 in the case of family coverage ($4,950 – $7,400 for 2022)
- If annual out-of-pocket expenses are required to be paid (other than for premiums) covered benefits cannot exceed $5,300 for self-only coverage ($4,950 for 2022) and $9,650 for family coverage ($9,050 for 2022).
Limit on health FSA salary reduction contributions under a cafeteria plan: For purposes of determining whether a health FSA benefit will be a “qualified benefit” for the 2023 plan year, the cafeteria plan must provide that an employee may not elect to have salary reduction contributions exceeding $3,050 made to the health FSA ($2,850 for 2022).
Small employer health insurance credit: An eligible small employer may claim, subject to a phaseout, a credit equal to 50% of non-elective contributions for health insurance for its employees. The credit is reduced under certain circumstances, including if the average annual full-time equivalent wages per employee are more than $30,700 ($28,700 for 2022).
Qualified small employer HRA: For 2023, a qualified small employer HRA is an arrangement which, among other requirements, makes payments and reimbursements for qualifying medical care expenses of an eligible employee that does not exceed $5,850 ($5,450 for 2022), or $11,800 in the case of an arrangement that also provides for payments or reimbursements for family members of the employee ($11,050 for 2022).
Property exempt from levy: The value of property exempt from levy (fuel, provisions, furniture and other household personal effects, as well as arms for personal use, livestock, and poultry) may not exceed $10,810 for levies in 2023 ($10,090 for 2022). The value of property exempt from levy (books and tools necessary for the trade, business, or profession of the taxpayer) may not exceed $5,400 for levies issued in 2023 ($5,050 for 2022).
Wage levy. The weekly amount of an individual’s salary, wages, etc. exempt from levy for 2023 is $4,700 ($4,400 for 2022) multiplied by the number of the taxpayer’s dependents for the tax year of the levy, plus the taxpayer’s standard deduction, divided by 52.
Source: Thomson Reuters
by admin | Aug 22, 2022 | Blog
Congress has passed, and the President has signed, the Inflation Reduction Act of 2022. While the legislation largely focuses on climate change mitigation and deficit reduction, several provisions are of interest to group health plan sponsors and their advisors. Here they are as followed:
Enhanced Premium Tax Credit: The favorable premium tax credit rules adopted in the American Rescue Plan Act (ARPA) will now remain in effect through 2025. As background, the Affordable Care Act (ACA) created a refundable premium tax credit, which is available on a sliding-scale basis for individuals and families who are enrolled in an Exchange health plan and who are not eligible for other qualifying coverage or affordable employer-sponsored health insurance plans providing minimum value.
The ACA limits the credit to taxpayers with household income between 100% and 400% of the federal poverty line who purchase insurance through an Exchange health plan. ARPA eliminated the upper income limit for eligibility and increased the amount of the premium tax credit by decreasing, in all income bands, the percentage of household income that individuals must contribute for Exchange coverage. The adjusted percentage ranges from zero to 8.5%.
Medicare Prescription Drug Cost Reductions: Several cost reduction measures will benefit enrollees in Medicare Part D prescription drug coverage. Beginning in 2023, cost-sharing for insulin will be capped at $35 per month. Annual Part D out-of-pocket prescription drug costs will be capped at $2,000 starting in 2025. For the first time, the United States Department of Health and Human Services (HHS) will be authorized and required to negotiate certain Medicare drug prices with manufacturers beginning in 2026. In addition, starting in 2023, manufacturers must pay Medicare a rebate if average prices of certain drugs increase faster than inflation.
Note: Because the legislation does not include comparable prescription drug cost reductions for private plans, there is some concern that reduced costs for Medicare enrollees will result in increased costs for employer plans and participants as price increases are shifted to private plans to make up for lost revenue.
Insulin-Related HDHP Safe Harbor: The legislation amends to provide that plans will not lose their HDHP status by reason of failing to have a deductible for certain insulin products. This provision is effective for plan years beginning after December 31, 2022.
Note: The provision codifies and expands IRS guidance that allows HDHPs to provide insulin on a no-deductible or low-deductible basis under specified circumstances without adversely affecting HSA eligibility.
Source: Thomson Reuters
