We have 5 of the most important tax updates that have happened so far in 2014.
1. 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.
Taxation of Tips
2. 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.
Treasury Dept. Rule Delay
3. 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.
4. 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.
IRS Warning on Tax Scams
5. 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 firstname.lastname@example.org.
Please contact our office if you wish to learn more about these updates or have any questions!