The Tax Breaks That Come with Disasters

While the tax code allows you to claim deductions for household damage caused by thefts, vandalism, fires, floods, hurricanes, and others kinds of casualties, there are some restrictions.

·         Relief is available only for uninsured losses

·         They must be reduced by any settlements you receive, or expect to receive, from your homeowner's or renter's insurance

·         No write-off for the first $100 of each theft or casualty loss

·         Total losses generally are allowable only to the extent that they exceed 10 percent of adjusted gross income, the amount listed on the last line of the first page of the 1040 form

For those with large deductions that surpass the 10 percent threshold, many are unable to authenticate their losses, due to inadequate records and a reliance on estimates, assuming they are able to recall each item that was lost – a nearly impossible feat.

A U.S. Tax Court, in one case, emphasized that it “bears heavily” against taxpayers who base their estimates only on recollections, versus written records.

The IRS wants to aid those who are impacted by thefts, casualties or disasters, offering a free guide, entitled Publication 2194, Disaster Losses Kit for Individuals.

It includes a workbook to list contents on a room-by-room basis.  Alongside each property item are seven columns in which to record the following details: number of items, date acquired, cost, value before the loss, value after the loss, decrease in value, and amount deductible as a loss.

The workbook is invaluable in inventorying household goods and personal property; it’s prudent to keep a copy outside your home in a safe deposit box or other secure location.

To read the entire article, please visit www.accountingweb.com.

Obamacare Fee for Employers Due July 31

The purpose of this post is to alert you to an annual fee that employers who sponsor self-insured health plans have to pay on or before July 31 that you may not have heard about. The good news is that for most small employers the fee for now is only $2.00 per person covered by the plan.

The fee is known as the PCORI fee, named after the provision in the recent Obamacare legislation that created the Patient-Centered Outcomes Research Institute (PCORI). It will serve to provide research on health care decisions, including proof of the effectiveness of various treatments being used by health care providers.

• What plans are covered by the fee? The PCORI fee applies to all self-insured health plans except for certain limited scope dental and vision plans, most wellness programs, and most health FSA plans funded by the employee. You should be aware that HRA arrangements whereby the employer pays various medical expenses such as insurance deductibles, co-payments and co-insurance ARE subject to the fee.
• Who pays the fee? For self-insured plans the plan sponsor (employer) is responsible for paying the fee.
• How much is the PCORI fee? The fee is $2.00 for the average number of covered lives for the 2013 plan year for plan years ending on or after October 1, 2013.
• How are “covered lives” counted? There are several methods which can be used to count the average covered lives, including the actual count method, snapshot count method and the Form 5500 count method. Covered lives include any spouses or dependents, however, a special rule applies to HRAs that allows only the employee participants to be counted.
• How is the PCORI fee paid? For plan years ending on or after October 1, 2013 and before January 1, 2014, the fee will be reported on Form 720—Quarterly Federal Excise Tax Return for the 2nd quarter, which is due on or before July 31, 2014.

The discussion above provides the highlights of this new fee. If you have any questions about whether this fee apples to your situation, or if we can be of any further assistance, do not hesitate to contact us.