Tax Break: The TurboTax Blog » tax reform

Health Care Insurance Mandate Upheld: What Does It Mean for You and Your Taxes?

TurboTaxLisa — Fri, 29 Jun 2012 05:10:25 +0000

The Affordable Care Act, Obamacare, individual health insurance mandate-no matter what term you use, they have been all the buzz, since the individual health insurance mandate was upheld by a Supreme Court ruling today. The individual insurance mandate aims to extend health insurance coverage to 30 million uninsured Americans, but how does that ruling impact your taxes today or even the next time you file your taxes?

Not too much since Americans have until 2014 to take action if they do not have health insurance and those who have insurance will not be impacted at all.

Affordable Care Act

To make things more clear for you and relieve any angst you may have about the ruling and how it relates to taxes, I have outlined the mandate’s two key provisions:

One provision requires most Americans to obtain minimum health insurance coverage by 2014 or pay a penalty when tax year 2014 taxes are filed.
The other provision is a Medicaid expansion, which gives funds to states who provide specified healthcare to all citizens whose income falls below certain limits.

Many other provisions have already gone into effect such as reductions in seniors’ prescription drug costs, help for children and some adults with preexisting conditions, and allowing children up to age 26 to remain on their parents’ health insurance.

So far there aren’t any other new details regarding the health care mandate, but rest assured you don’t have to worry about including anything related to this ruling on your 2012 or even 2013 taxes and we will continue to keep you informed and up to date with all of the latest information on this topic.

“Super Committee” Misses Deficit Reduction Agreement Deadline

TurboTaxLisa — Sat, 26 Nov 2011 08:52:53 +0000

After three months of waiting and the creation of the congressional “Super Committee“, made up of six democrats and six republicans, the “Super Committee” and Congress could not come up with a deficit reduction agreement of 1.2 trillion in spending cuts and possible tax increases by the November 23 deadline.

What Does This Mean for Taxpayers?

Tax implications of the decision(or lack of decision) remains uncertain at this point. What is certain are automatic (mandatory) budget cuts of 1.2 trillion, will commence in the beginning of 2013, unless Congress and the “Super Committee” can agree on a bipartisan (balanced) plan before January 2013.

The last resort, mandatory reductions, will cut evenly from both domestic and defense programs. The automatic Budget Control Act, passed in August, already mandated $450 billion in defense spending cuts over 10 years.

We also know that the credit rating agency, Standard and Poor’s issued a statement, that failure to reach an agreement would not downgrade the United States credit rating as long as the automatic spending cuts remained in place.

We will continue to update you on tax implications of the automatic budget cuts. Who knows, maybe congress will come up with a bipartisan agreement before January 2013. One thing is certain, we will find out soon if Congress can agree on a series of budget decisions set to expire – The payroll tax cut, which reduced the amount of social security taxes taken out of your paycheck and the extension of unemployment benefits both set to expire December 31, 2011 and Bush Tax cuts set to expire December 31, 2012.

What Are the Different 1099 Tax Forms?

Jim Wang — Thu, 17 Nov 2011 02:13:34 +0000

At tax time, one of the forms that you might run into is the 1099 Form. The IRS uses this form to distinguish different types of income that may not come to you as part of a regular job. When you aren’t issued a W-2 for your income, chances are that you will be issued a 1099. Those who have paid you are responsible for issuing the 1099 as long as you made over $600.

You should keep your 1099 with your tax records and reconcile it with your own records. Additionally, realize that, even if you don’t receive a 1099 from a payer, you are still responsible for reporting the income to the IRS. Payers are supposed to send a copy of the 1099 to the IRS, so even if you are overlooked, there is a good chance that the IRS has a copy of the 1099. You should receive your 1099s by January 31. If you don’t receive your 1099s by then, you should call the payer and request it. In addition, if your 1099s are incorrect you should also request that the payer issue a corrected 1099. If they still do not correct the 1099, you should notify the IRS and also follow our instructions in “Missing Your W-2 Form, Corrected W-2s, and Multiple W-2s“.

Types of 1099s

The 1099 series of forms have different versions, each for a variety of purposes. The 1099-INT form is used to report interest income. Your bank or other financial institution might issue a 1099-INT form if you received interest income from a CD, or from a deposit account. If you have received debt forgiveness on a loan, this is considered income, and you will be issued a 1099-C. Income proceeds from real estate transactions make use of the 1099-S.

Several other 1099 forms exist for transactions such as Social Security benefits, distributions from cooperatives, government payments and more. However, one of the most common 1099 forms that you are likely to see is the 1099-MISC. This is the form that independent contractors receive from those who have paid them. If you work as a freelancer, you will receive a 1099-MISC form showing what you were paid. However, if a payer hasn’t paid you at least $600 in the past year, you might not get a 1099-MISC – but you still have to report your income. For a comprehensive list of types of 1099s, click on our “What is a 1099 Form?” blog post.

The New 1099-K

Of interest to many people right now is the new 1099-K form. This new form will be issued, starting with sales in 2011, by banks and other payment processors, to report gross receipts of payments. This includes payments received via PayPal. So, those who use PayPal, accept credit cards, and sell on eBay will have their income reported, officially by payment processors, to the IRS.

It is worth noting, though, that not everyone in this situation will be hit with the new paperwork. If your total payment transactions are less than $20,000, and there are less than 200 transactions, they won’t have to be reported on the 1099-K. Technically, you should be reporting the income anyway, but this move is meant to help better enforce it.

Beware double reporting. You will need to make sure you have good records, though. Although the new reporting requirements shift the reporting responsibility from the customers to the merchants and banks, customers may not make the distinction and could report the same transactions twice. Also, realize that payment processors and other 1099-K reporters won’t subtract out charge-backs and fees – they only report gross receipts.

Instead of relying on 1099s for information about your income, you should keep good records. That way, if the IRS asks for information on the way you offset your income with expenses, or the double reporting issue, you have what you need to back up your position. As part of your due diligence, you should always keep a reconciled bank account for your business where you can track your income and expenses. In the end, you are responsible for paying your taxes based on what you were paid. If you underpay, the IRS will find out. If you overpay, the IRS may never know!

Debt Ceiling Limit Increase Voted Into Law: What Does This Mean for Taxpayers

TurboTaxLisa — Thu, 04 Aug 2011 21:12:48 +0000

On the evening of July 31, Congress reached an agreement to raise the 14.3 trillion debt ceiling and reduce federal spending, instantly giving the Treasury 400 billion additional borrowing power. In May the debt limit was reached, however the Treasury Department said it could keep government functioning normally until the close of August 2. Congressional leaders came to an agreement and the Senate raced to get the debt ceiling increase signed into law just hours before the deadline. Americans anxiously waited as our economy was faced with the possibility of government default.

What is the Debt Ceiling?

The Debt Ceiling has been all the buzz for the past 5 months, but what is it exactly? The debt ceiling is the legal limit set by Congress that can be borrowed by the federal government. The cap or legal limit applies to debt owed to the public and to federal trust funds. Public debt can be in the form of bonds issued to the public by the Treasury. Federal trust funds are funds such as Social Security and Medicare. Federal law requires Congress to authorize the government to borrow any money that is needed to pay for programs Congress puts into place. The maximum legal limit of 14.3 trillion was reached back in May so it was necessary to pass a bill to raise the debt ceiling so that the federal government could continue to borrow funds and pay debts owed.

How Is the Debt Going To Be Reduced and How Will I Be Affected?

Congress is cutting government spending by 2.4 trillion over 10 years. The cuts will occur in two stages with 900 billion in cuts being enacted immediately.

The second stage of cuts will be enacted by a “Super Committee” who will be chosen by Congress by mid-August. The “Super Committee” will be made up of 6 Democrats and 6 Republicans who will be responsible for cutting 1.5 trillion from the federal deficit within 10 years. They will be responsible for coming up with a package which includes spending cuts and/or tax legislation. Congress will be responsible for voting on the entire package by Thanksgiving. If an agreement is not reached by then, the new law requires 1.2 trillion in automatic (mandatory) cuts.

The “Super Committee” could call for tax reform or increases, but the new law does not require these tax changes. Many senate leaders are optimistic that debt reductions can be achieved without tax reform. Specific items being cut are unknown at this time, but I will continue to keep you posted on debt ceiling updates and how it affects you.

No matter what decisions are made, you can quickly get an estimate of your taxes so you know where you stand. Check out our free tools, like TurboTax TaxCaster available online, via iphone, or android.

Here is an update on the “Super Committee“

Your Tax Dollar Now and in the Future Broken Down

joshritchie — Mon, 28 Mar 2011 03:06:43 +0000

It’s a critical year for Congress and the President to reach agreement about tax reform and the Federal budget. Not only can new legislation impact where your tax dollar is spent, it can also change where it is comes from. Congress and the President play a dual role in making this happen. Whether you file your income taxes and either owe Uncle Sam or begin looking for your tax refund, you might wonder, how is my tax dollar spent? Here we’ve broken down the sources of Federal tax revenue, how these have changed in the last decade, and how this same scenario could could play out in 2012, based on the proposed 2012 Presidential budget.

Interactive by Column Five Media.

Embed the above interactive post on your site using the code below:

<param name="quality" value="autohigh" /><param name="scale" value="exactfit" /><param name="salign" value="l" /><param name="name" value="TaxProcrastinator" /><param name="src" value="http://intuitturbotax.files.wordpress.com/2011/03/112403-tt-futuretax.swf" /><param name="align" value="top" /></object><br /><a href="http://www.turbotax.com/" target="_blank">Free Tax Filing, Efile Taxes, Income Tax Returns</a> – TurboTax.com