Posts tagged tax rules
Health Care: Flexible Spending Arrangements & 2011 Changes
Oct 11th
IR-2010-95, Sept. 3, 2010, http://bit.ly/9olbku
WASHINGTON — The Internal Revenue Service issued guidance reflecting statutory changes regarding the use of certain tax-favored arrangements, such as flexible spending arrangements (FSAs), to pay for over-the-counter medicines and drugs.
The Affordable Care Act, enacted in March, established a new uniform standard that, effective Jan. 1, 2011, applies to FSAs and health reimbursement arrangements (HRAs). Under the new standard, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan.
A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).
Employers and employees should take these changes into account as they make health benefit decisions for 2011.
For details on current rules, see Publication 969 , Health Savings Accounts and Other Tax-Favored Health Plans.
Updates on this and other health care reform provisions can be found on the Affordable Care Act page on IRS.gov. Notice 2010-59 and Revenue Ruling 2010-23, posted today, further explains this change.
Related Item: Questions and Answers on Over-the-Counter Medicines and Drugs
You might also be interested in watching this YouTube video: Flexible Spending Arrangements, http://bit.ly/aPhEPy.
Tax Info You Should Know for Your Business in 2010
Jan 8th
Vehicles
Mileage: If you drive your personal car or truck for business and opt to deduct costs based on the IRS standard mileage rate (rather than your actual costs), note that the rate for 2010 is much lower than it had been for 2009. The 2010 rate is 50 cents per mile, down from 55 cents per mile in 2009.
New vehicle purchase: If you purchase a new vehicle in 2010, the IRS has yet to announce depreciation limits (these probably will not be available until February). Based on projections that do not foresee an extension of bonus depreciation rules, expect the dollar limit for a car to be $3,060 and for a truck or van to be $3,160 (up slightly from 2009 levels).
Retirement plans
If you already have a 401(k) or other qualified retirement plan, be sure to note that contribution limits remain the same for 2010 as they were in 2009. Thus, the top contribution to a SEP for 2010 is $49,000.
There is a new retirement plan option available in 2010, and businesses with existing plans and those with no plans might consider this new option, called a DBk. It combines a modest defined benefit (pension) plan with a 401(k)-like option. As the year progresses, look for financial institutions to start offering DBk products.
Health plans
Health savings accounts (HSAs), allowing small business owners to provide affordable health coverage, have new contribution limits for 2010. The annual contribution limit for self-only coverage is $3,050; it’s $6,150 for family coverage. The contribution can be increased by $1,000 for each person age 55 or older by the end of the year. To be eligible to make an HSA contribution, a person must be covered by a high-deductible health plan. In 2010, this is a policy that has an annual deductible of at least $1,200 for self-only coverage and $2,400 for family coverage. If you provide an HSA for your staff and make the contributions, they are deductible and are not subject to FICA and FUTA taxes.
Expired provisions
A number of important business-related tax rules expired at the end of 2009. The House has passed a bill that would extend some of them for one year; the Senate will probably pass a similar measure early in 2010 and make the changes retroactive to January 1, 2010. Key extenders include:
- Research credit
- 15-year amortization of qualified leasehold, restaurant, and retail improvements
- Expensing of environmental remediation costs
- Employer credit for wage differential payments to employees called to active duty
- Enhanced deductions for charitable donations of food inventory, book inventory, and computer technology
For more information or to get answers on any questions you have, please contact CGP at (916) 685-1040.
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