Wednesday, November 20, 2013

529 plans help for College and Taxes!

Benefits of 529 plans

Federal tax benefits

529 plans offer unsurpassed income tax breaks. Although your contributions are not deductible on your federal tax return, your investment grows tax-deferred, and distributions to pay for the beneficiary's college costs come out federally tax-free. The tax-free treatment was made permanent with the Pension Protection Act of 2006.

Donor retains control of funds

You, the donor, stay in control of the account. The named beneficiary has no rights to the funds. You are the one who calls the shots; you decide when withdrawals are taken and for what purpose. Most plans even allow you to reclaim the funds for yourself any time you desire, no questions asked.  Compare this level of control to a custodial account under the Uniform Transfers to Minors Acts (UTMA) and you will find the 529 plan gives you much more say in how the plan is used!

Low maintenance

Third, a 529 plan can provide a very easy hands-off way to save for college. Once you decide which 529 plan to use, you complete a simple enrollment form and make your contribution (or sign up for automatic deposits). Then you can relax and forget about it if you like. The ongoing investment of your account is handled by the plan, not by you. Plan assets are professionally managed either by the state treasurer's office or by an outside investment company hired as the program manager.

Simplified tax reporting

You won't receive a Form 1099 to report taxable or nontaxable earnings until the year you make withdrawals.


If you want to move your investment around you may change to a different option in a 529 savings program every year (program permitting) or you may rollover your account to a different state's program provided no such rollover for your beneficiary has occurred in the prior 12 months.

State tax benefits

Your own state may offer some tax breaks as well (like an upfront deduction for your contributions or income exemption on withdrawals) in addition to the federal treatment.  If you don't get any benefits from your state, you have the pick of every 529 plan on offer.

Substantial deposits allowed

Everyone is eligible to take advantage of a 529 plan, and the amounts you can put in are substantial (over $300,000 per beneficiary in many state plans). Generally, there are no income limitations or age restrictions. Thinking about going back to college or graduate school in the future? Then set up a plan for yourself!

Health Savings Accounts now allow a $500 carryover

In the past, if you had a Health Savings Account with a balance at the end of the year, you surrendered the balance.  The IRS issued Notice 2013-71, which permits companies to amend their Sec. 125 cafeteria plans to allow participants in health flexible spending arrangements (FSAs) who do not use all of the money in a plan year to use up to $500 in the next plan year, in addition to the regular $2,500 limit during the succeeding year. Employers may amend their cafeteria plans to adopt the carryover provision for the current cafeteria plan year or any subsequent plan year.

The new carryover rule offers an alternative to the current grace period rule, and companies that adopt this new carryover rule are not permitted to also offer the grace period. Under the grace period rule, introduced in 2005, a cafeteria plan can allow participants to spend unused amounts in the first two months and fifteen days after the beginning of the next plan year.
Health FSAs in cafeteria plans permit employees to pay for qualified medical expenses such as co-pays and deductibles, eyeglasses, and hearing aids on a pretax basis. Once the plan year ends, employees lose any money left in the accounts under the use-it-or-lose-it rule (unless the employer offers the grace period). This new carryover rule helps employees by allowing them to make the election without worrying they will forfeit some of their money and to lessen the incentive to make wasteful purchases (such as for a third pair of eyeglasses) at the end of a year to exhaust the funds.
Employers are not required to allow the $500 carryover (and can also set a lower limit) or the grace period, but to participate, employers must amend their plans on or before the last day of the plan year for which amounts may be carried over, and may be effective retroactively, provided certain requirements are met.


Monday, November 18, 2013

Tax Credits for Hiring Military Veterans

An often overlooked employer benefit is  a tax return credit available to businesses who hire qualified vets before December 31, 2013.  The up to $9,600 credit is part of the Work Opportunity Tax Credit (WOTC) and is included with other business related credits on the Form 3800, General Business Credits.  Yes, you as an employer may get a tax credit up to almost ten thousand dollars for hiring some of the most qualified experienced workers in the market today.
Let’s take a look at the qualifications of the credit:
Hire a qualified veteran.  To be considered a qualified veteran the individual must:
  • Have served on active duty for more than 180 days or have been discharged or released from active duty for a service-connected disability, and
  • Not have a period of active duty of more than 90 days that ended during the 60-day period ending on the hiring date.
  • Be hired before December 31, 2013.
In addition, the veteran must be certified by the appropriate State Workforce Agency (SWA) as meeting one of the following:
  • A member of a family receiving assistance under SNAP (food stamps) for at least a 3-month period that ended during the 12-month period ending on the hiring date.
  • Unemployed for a total of at least 4 weeks but less than 6 months in the 1-year period ending on the hiring date.
  • Unemployed for a total of at least 6 months in the 1-year period ending on the hiring date.
  • Entitled to compensation for a service-connected disability and hired not more than 1 year after being discharged or released from active duty in the U.S. Armed Forces.
  • Entitled to compensation for a service-connected disability and unemployed for at last 6 months in the 1-year period ending on the hiring date.
Finally, the veteran must not be any of the following:
  • Related to you, the employer
  • Have worked for you at any time in the past
  • Your dependent
  • Work less than 120 hours during the year
The vet must complete and sign Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, and provide you with the original. You must sign the Form 8850 and submit it to the appropriate (SWA) within 28 days of the hire date. The credit is 40 percent of the no more than $24,000 wages paid to a qualifying vet that works at least 400 hours for the 12-month period beginning with the hiring date. The credit is reduced to 25 percent of the wages paid to qualifying vets who work at least 120 hours, but less than 400 hours.
For individuals and also C Corporations electing the credit: Claim the credit using Form 5884, Work Opportunity Credit, and Form 3800, General Business Credits, for the year the wages are paid.  S corporations and LLC's can report straight from form 5884 to Schedule K.

Monday, November 11, 2013

Florida Minimum Wage to increase by 14 cents Jan. 1, 2014

The Florida Department of Economic Opportunity (DEO) has announced that as of January 1, 2014 minimum wage will increase by 14 cents. Currently minimum wage is 7.79 and it will go to 7.93. Employees whose wages are based on tip earnings will go from the current of 4.77 per hour to 4.91 per hour.