Tax season brings changes

Last year’s introduction of the Affordable Care Act and changes in other federal legislation have led to a few changes this tax season, for both small businesses and individuals.

The tax-filing season officially began Friday, Jan. 31, 10 days later than in the past as the 16-day federal shutdown in October slowed government preparations, according to information provided by the Internal Revenue Service.

Delaying the start date has allowed the IRS adequate time to program and test its tax-processing systems.

Still, the final day to pay federal taxes without a penalty is April 15.

Businesses

The requirement for businesses to provide health insurance or pay a penalty come tax season has been delayed until 2015, but there are a still a few tax credits available for some companies.

Employers with fewer than 25 employees may qualify for a tax credit that could result in a tax refund, according to Calvin Davis, regional director of the Small Business Administration.

To be eligible, the business must have paid at least 50 percent of the cost of single health care coverage for each full-time employee, and those employees must have average wages of less than $50,000 a year, Davis said.

This does not include coverage for dependents or spouses.

The government initially mandated the insurance must be purchased through the Small Business Health Options Program, or SHOP, Marketplace to be eligible for the tax credit, but because the launch of that site was delayed until November, Davis said the insurance plan must be SHOP eligible — fair and affordable based on the new health care law’s guidelines.

The maximum credit will be 35 percent of premiums paid for small-business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

The amount of the credit is dependent on how many people are employed, Davis said.

To claim the “Credit for Small Employer Health Insurance Premiums,” businesses must complete tax form 8941.

Individuals

Regardless of how much you make, there are a few changes that will affect all taxpayers this season.

While not directly related to the Affordable Care Act, taxes during 2013 were subject to a 2 percent increase in the Social Security taxes withheld, according to Sue Johnson, an enrolled tax agent certified by the U.S. Treasury Department.

The increase follows the end of a tax holiday aimed at boosting the economy in the midst of a recession. The tax dropped from 6.2 percent to 4.2 percent in 2011 and 2012, but went back up last year.

“This means that if somebody makes $35,000 a year, they took home $58 less in pay each month,” Johnson said.

The Affordable Care Act added an additional Medicare tax of 0.9 percent to those whose annual income is more than $200,000, she said.

The additional Medicare tax applies to wages, railroad retirement compensation and self-employment income more than $200,000 for most filing statuses, $125,000 for married filing separately and $250,000 for married filing jointly, according to information provided by the IRS.

Individuals making more than $400,000 annually paid a 39.6 percent tax on their net income, up 4.6 percent from previous years, Johnson said.

Avoid penalty in 2015

Beginning next year, a penalty will be applied to the income taxes of individuals without health insurance, Johnson said.

Depending on filing status and income, the penalty can range from $96 to $695.

“The penalty next year isn’t so bad, but a $285 penalty in 2014, by 2016 is a $2,000 penalty,” Johnson said.