It may have been a bitter pill for the Obama administration to swallow, but in early July White House officials announced a one-year delay, until January 1, 2015, in the Affordable Care Act (ACA) mandate that employers with 50 or more full-time-equivalent employees provide health care coverage to their full-time employees or pay penalties. A full-time employee is one who works 30 or more hours per week.

The postponement of the employer “shared responsibility” coverage mandate – also known as “pay or play” – is related to a delay until 2015 in implementing two penalty-related information-reporting provisions. One of the provisions requires reporting by insurers, self-insuring employers and other parties that provide health coverage, and another requires reporting by certain employers concerning the health coverage they offer to their full-time employees.

Consequently, employers will not, for 2014, face the potential $2,000 penalty per full-time employee if they fail to offer minimum essential coverage to all full-time employees and dependents, or the $3,000 penalty per full-time employee who receives subsidized coverage on a public exchange because the employer-provided coverage failed to meet certain affordability and minimum value requirements.

The reason the administration gave for the delay was to allow more time for consideration of ways to simplify the new reporting requirements and for employers to adapt their health coverage and reporting systems.

The administration’s actions do not affect employees’ access to the premium tax credits available under the ACA or any other provision of the law.

The public exchanges are still expected to open on October 1, 2013, to allow individuals and small employers to enroll for healthcare coverage for 2014, and that the subsidies for low- and moderate-income individuals to purchase coverage on the public exchanges also will be provided starting in 2014.

While the “play or pay” penalty has been postponed, employers still have a list of things to do regarding their group health plans and the many other aspects of health care reform which are moving forward. Unaffected by the postponement, for instance, are the reform act’s requirement that most employer-provided health care include coverage for recommended preventive care and the requirement for employers subject to the Fair Labor Standards Act to provide written notices about government-run exchanges to each of their employees and to all new hires by October 1, 2013.

Our firm is holding a workshop on the ACA on September 26 to help keep clients up-to-date on the exchanges and other developments regarding the implementation of the law. Victoria McCoy, president of Crown Benefits, who has previously conducted two workshop sessions for Whalen clients on the ACA, will be the presenter. More details about the program will be sent to clients in September.

Finally, Vorys, Sater, Seymour & Pease has posted on its website an employment alert with implications of the delay of the pay or play penalties. Click here to review.

 

We’re always looking for ways to serve our clients and support them. Whether it’s helping them identify the advantages and disadvantages of converting a Traditional IRA to a Roth IRA or sending them home from our office with a freshly baked chocolate-chip cookie, we strive to provide clients with Five-Star service in any way we can.

Karen Griffin, an administrative specialist with the firm, is also a notary public, and she will assist clients who need a document notarized. Notaries authenticate legal papers by witnessing the signing and verifying the identity of the person signing. Some legal papers are required by law to be notarized to be effective.

In the past Karen has notarized business and personal documents, such as car titles, banking documents, children’s educational records, real estate deeds and sworn affidavits.

If you need a document notarized, contact Karen at 396-4200 or by email beforehand to make arrangements. Make sure to bring some form of photo identification.

Do you work from home? If so, you may be familiar with the home office deduction, available for taxpayers who use their home for business. Beginning in tax year 2013, there is a simpler option to figure the business use of your home.

According to the IRS, this simplified option does not change the rules for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements. The new option can save you a lot of time and will require less paperwork and recordkeeping.

Here are six facts the IRS wants you to know about the new, simplified method to claim the home office deduction.

1.  You may use the simplified method when you file your 2013 tax return this year. If you use this method to claim the home office deduction, you will not need to calculate your deduction based on actual expenses. You may instead multiply the square footage of your home office by a prescribed rate.

2.  The rate is $5 per square foot of the part of your home used for business. The maximum footage allowed is 300 square feet. This means the most you can deduct using the new method is $1,500 per year.

3. You may choose either the simplified method or the actual expense method for any tax year. Once you use a method for a specific tax year, you cannot later change to the other method for that same year.

4. If you use the simplified method and you own your home, you cannot depreciate your home office. You can still deduct other qualified home expenses, such as mortgage interest and real estate taxes. You will not need to allocate these expenses between personal and business use. This allocation is required if you use the actual expense method. You’ll claim these deductions on Schedule A, Itemized Deductions.

5. You can still fully deduct business expenses that are unrelated to the home if you use the simplified method. These may include costs such as advertising, supplies and wages paid to employees.

6. If you use more than one home with a qualified home office in the same year, you can use the simplified method for only one in that year. However, you may use the simplified method for one and actual expenses for any others in that year.

The chart below provides a comparison of the regular method and the new simplified option and may be of assistance in helping you determine which method is better for you.

Simplified Option	Regular Method
Deduction for home office use of a portion of a residence allowed only if that portion is exclusively used on a regular basis for business purposes	Same
Allowable square footage of home use for business (not to exceed 300 square feet)	Percentage of home used for business
Standard $5 per square foot used to determine home business deduction	Actual expenses determined and records maintained
Home-related itemized deductions claimed in full on Schedule A	Home-related itemized deductions apportioned between Schedule A and business schedule (Sch. C or Sch. F)
No depreciation deduction	Depreciation deduction for portion of home used for business
No recapture of depreciation upon sale of home	Recapture of depreciation on gain upon sale of home
Deduction cannot exceed gross income from business use of home less business expenses	Same
Amount in excess of gross income limitation may not be carried over	Amount in excess of gross income limitation may be carried over
Loss carryover from use of regular method in prior year may not be claimed	Loss carryover from use of regular method in prior year may be claimed if gross income test is met in current year

  If you’d like additional guidance on the use of the simplified home-office deduction option, contact your Whalen tax adviser.

Ohio’s small-business owners received a tax cut in the final state budget bill that legislators approved and the governor signed into law at the end of June. “Most small businesses are getting a whopping tax cut,” said Gov. John Kasich in commenting about the budget legislation that the Ohio General Assembly approved on June 28 and the governor signed into law on June 30.

The final budget bill restored the 50 percent income-tax deduction for small-business owners originally proposed by the governor, but deleted in the House’s version of the two-year budget proposal. The Senate had restored the tax cut, and a conference committee, which reconciled differences between the House and Senate versions of the bill, retained the deduction amounting to an estimated $1.4 billion over a two-year budget period that begins July 1.

The legislation provides a deduction equal to 50 percent of a sole proprietor or pass-through entity owner’s business income.  The deduction is limited to $125,000 per taxpayer per year, or $62,500 for spouses who file separately and who each report business income.  This personal income tax deduction is available for 2013 and cannot be applied to returns for estates, trusts, or pass-through entities.  Business owners would save up to a maximum of approximately $7,000 a year in income-tax payments. Total savings for owners would be $1.1 billion over the two years.

The budget authorizes spending through June 30, 2015, with the bulk of the funds devoted to schools and health care programs, including Medicaid. The 5,000-plus page bill also includes a number of tax reforms that the administration and legislators believe will help position the state for further economic growth.

The bill did not include an expanded sales tax on services, as the governor had proposed, but it did make some changes in other tax provisions affecting businesses.

One of these changes involves the Commercial Activity Tax (CAT). The bill sets the following new minimum tax payments:

• Businesses with $1 million to $2 million in receipts would face an $800 minimum.
• Businesses between $2 million and $4 million in receipts would face a $2,100 minimum.
• Businesses with more than $4 million in receipts would face a $2,600 minimum.
• All business would be subject to a .26 percent rate on receipts over $1 million in addition to the tiered minimum while those with $150,000 to $1 million in gross receipts would continue to pay a flat $150.

Other provisions of the bill include: 

• An increase in the state’s sales tax. Changes to Ohio’s sales tax include an increase from 5.5 percent to 5.75 percent, effective September 1. The law also subjects the sale of electronically transferred digital books or digital audio or audiovisual works to sales tax

• A reduction in personal income tax for all taxpayers. Personal income tax rates are cut by 10 percent across-the-board, phased in over three years. The state currently has nine income-tax brackets, ranging from 0.6 percent for annual income under $5,200 to 5.9 percent for income earned beyond $208,500. The new law reduces all income-tax brackets by 8.5 percent this year, then 9 percent next year and 10 percent in 2015 and beyond. A 10 percent cut would bring the top rate to 5.3 percent. It also temporarily freezes tax brackets and personal exemptions so they no longer rise with inflation and puts in place a nonrefundable earned-income tax credit.

• Elimination of the 12.5 percent residential property tax rollback on any new and replacement tax levies. The state pays 12.5 percent of your local property-tax bill. This costs the state about $1.1 billion per year just for schools, which receive most of those taxes. The amount has grown as new levies have been approved. All current levies and those approved in August would not be affected, nor would renewals of current tax levies. But new levies, including replacement levies, would cost homeowners more than they would have under current law because they would pay 100 percent of the levy.

• A change in eligibility for the homestead exemption. Seniors age 65 or older and residents who are permanently disabled qualify for the homestead exemption, shielding $25,000 of the market value of their home from property taxation. Those who are not yet 65 and who earn more than $30,000 no longer would qualify for the homestead exemption. This was the threshold before eligibility was expanded in 2007.

In all, the budget includes a $2.7 billion tax cut over three years.

Among the items the governor vetoed from the bill was a proposal to collect internet sales tax on transactions between out-of-state retailers and Ohioans. The governor questioned the provision’s legality.

He also vetoed language that hindered his efforts to move forward with an expansion of Medicaid. However, discussions on how to expand and reform Medicaid are expected to take place through the summer and could be acted upon in September. The governor wants to cover another 275,000 low-income Ohioans and bring $13 billion in federal funding to the state over the next seven years.

Whalen & Company is a majority women-owned business, and the partners are Laura Wojciechowski, Lisa Shuneson and Richard Crabtree. A number of the firm’s clients are women-owned businesses, and we are very involved in organizations that support the growth and development of women business owners.

We were very pleased to learn recently that one of our clients, Catherine Lang-Cline, president and co-founder of Portfolio Creative, has been recognized as one of 12 “Women You Should Know!” in 2014 by Women for Economic and Leadership Development (WELD).

Each year WELD recognizes a diverse group of 12 women in the central Ohio community who are high impact leaders within their organizations, support the leadership development of other women, give time, talent and resources to their community and invest in the growth of women-owned businesses. The organization honors the achievements of these notable women in its annual Twelve Women You Should Know™ calendar.

Catherine spent more than 20 years in the creative industry as a designer working for ad agencies, in-house marketing departments and as a freelancer. In 2005 she and Kristen Harris started Portfolio Creative to help artists find work and clients find talent. Today Portfolio Creative is the nation’s fastest growing creative staffing and recruiting firm connecting clients with creative talent in all areas of design, marketing, communications and advertising. It also provides direct hire, educational resources and payroll services.

Catherine is a Certified Staffing Professional with the American Staffing Association. She is also an active member of Columbus Society of Communicating Arts, Advertising Federation of Columbus, Columbus Chamber of Commerce, Women Presidents’ Organization, and is a committee member for the National Association of Women Business Owners®.

The company has been recognized with awards from Staffing Industry Analysts, Columbus CEO magazine, the Columbus Chamber, Enterprising Women magazine, the Stevie Awards for Women in Business, the American Staffing Association, the Ohio Department of Development and the National Association of Women Business Owners.

In 2013 Portfolio Creative had average satisfaction ratings quadruple the industry average, as measured by the Inavero Best of Staffing list. It has been an Inc. 5000 fastest growing company for the past four years.

The Twelve Women You Should Know™ calendar will be unveiled at a reception on November 13 at Mount Carmel St. Ann’s Hospital from 6 p.m. to 8 p.m. WELD was founded with the mission to develop and advance women’s leadership to strengthen the economic prosperity of the communities it serves.  For more information about WELD and its 2014 calendar, click here.