Self-Insured Employers Must File Health Coverage Information Returns

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Regardless of size, all employers that provide self-insured health coverage to their employees are treated as coverage providers. These employers must file an annual return reporting certain information for each employee they cover.
As coverage providers, these employers must:

• File a Form 1095-B, Health Coverage, with the IRS, accompanied by a Form 1094-B transmittal. Filers of more than 250 Forms 1095-B must e-file. The IRS allows and encourages entities with fewer than 250 forms to e-file.
• Furnish a copy of the 1095-B to the responsible individual – generally the primary insured, employee, parent or uniformed services sponsor. You may electronically furnish the Form 1095-B.

If a provider is an applicable large employer also providing self-insured coverage, it reports covered individuals on Form 1095-C instead of Form 1095-B. Form 1095-C combines reporting for two provisions of the Affordable Care Act for these employers.
The information reporting requirements are first effective for coverage provided in 2015.  Thus, health coverage providers will file information returns with the IRS in 2016, and will furnish statements to individuals in 2016, to report coverage information in calendar year 2015.
The information that a provider must report to the IRS includes the following:

• The name, address, and employer identification number of the provider.
• The responsible individual’s name, address, and taxpayer identification number, or date of birth if a TIN is not available.  If the responsible individual is not enrolled in the coverage, providers may, but are not required to, report the TIN of the responsible individual.
• The name and TIN, or date of birth if a TIN is not available, of each individual covered under the policy or program and the months for which the individual was enrolled in coverage and entitled to receive benefits.

For more information, see Questions and Answers on Information Reporting by Health Coverage Providers on IRS.gov/aca.  Employers who provide self-insured coverage should review Publication 5125, Responsibilities for Health Coverage Providers. Applicable large employers should review Publication 5196, Reporting Requirements for Applicable Large Employers.

Four Tax Tips about Hobbies that Earn Income

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Millions of people enjoy hobbies. They can also be a source of income. Some of these types of hobbies include stamp or coin collecting, craft making and horse breeding. You must report any income you get from a hobby on your tax return. How you report the income is different than how you report income from a business. There are special rules and limits for deductions you can claim for a hobby. Here are four basic tax tips you should know if you get income from your hobby:

1. Business versus Hobby.  A key feature of a business is that you do the activity to make a profit. This differs from a hobby that you may do for sport or recreation. There are nine factors to consider when you determine if you do the activity to make a profit. Make sure you base your decision on all the facts and circumstances of your situation. Refer to Publication 535, Business Expenses to learn more. You can also visit IRS.gov and type “not-for-profit” in the search box.
2. Allowable Hobby Deductions.  You may be able to deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is helpful or appropriate. See Publication 535 for more on these rules.
3. Limits on Expenses.  As a general rule, you can only deduct your hobby expenses up to the amount of your hobby income. If your expenses are more than your income, you have a loss from the activity. You can’t deduct that loss from your other income.
4. How to Deduct Expenses.  You must itemize deductions on your tax return in order to deduct hobby expenses. Your costs may fall into three types of expenses. Special rules apply to each type. See Publication 535 for how you should report them on Schedule A, Itemized Deductions.

File Your 2014 Tax Return Now to Receive Timely Advance Payments in 2016

IRS Health Care Tax Tip 2015-40, July 13, 2015

If you received advance payments of the premium tax credit in 2014 under the health care law, you should file your 2014 tax return as soon as possible this summer to ensure you can timely receive advance payments next year from your Marketplace.
If advance payments of the premium tax credit were paid on behalf of you or an individual in your family in 2014, and you do not file a 2014 tax return, you will not be eligible for advance payments of the premium tax credit or cost-sharing reductions to help pay for your Marketplace health insurance coverage in 2016.  This means you will be responsible for the full cost of your monthly premiums and all covered services.   In addition, we may contact you to pay back some or all of the 2014 advance payments of the premium tax credit.  

Because Marketplaces will determine eligibility for advance tax credit payments and cost-sharing reductions for the 2016 coverage year this fall, it will substantially increase your chances of avoiding a gap in receiving this help if you file your 2014 tax return with Form 8962 electronically as soon as possible.

If you missed the April 15 deadline or received an extension to file until Oct. 15, you should file your return as soon as possible.  You should not wait to file. File now to reconcile any advance credit payments you received in 2014 and to maintain your eligibility for future premium assistance.
Remember that filing electronically is the best and simplest way to file a complete and accurate tax return as it guides you through the process and does all the math.

For more information about the Affordable Care Act and the premium tax credit, visit IRS.gov/aca.

A Letter From the IRS?

If you get an unexpected letter from the Internal Revenue Service it can be quite a shock. The only welcome news from the IRS is your tax refund check. Anything else could make your pulse race. So that's the first piece of advice: Don't panic! And the second piece of advice is: Don't ignore that notice!

The IRS sends out literally millions of letters a year to taxpayers (and never contacts you by phone or social media. Most notifications are not about an audit, but may simply ask for more information.Usually there was something left off your tax return, such as a W2 or 1099 income, that was reported to the IRS. The most common letter is a CP 2000. Here is a link to the IRS website for a list of the dozens of notices the might send out.

If the issue is simple or you think the notice was sent in error, respond in writing along with the tear-off bottom portion of the notice. A response could take 30 days, so you can try calling the number on the letter -- but be prepared to wait on hold. Call early. Start at 7:00AM.  Get the name of the person with whom you speak. But for significant issues you should seek professional help. 

1. Seek professional advice from an Enrolled Agent (EA) or CPA. Whether it's a demand for back taxes, or a notice of examination, you don't want to go into this without professional help -- even if you did your tax return on your own, with computer software. Some IRS agents are inflexible, but a professional can deal with these situations without emotion.

2. Examine the IRS letter carefully. It is more serious if an agent has been assigned to the case (as opposed to receiving an automated letter from the service center on a minor issue). When an agent is assigned, the scope of the audit is broader than a simple question.

3. Gather all documentation. The more supporting documentation you can present, the better your chances of making your point. This is a good reason to always keep your tax information for at least 6 years. And, of course, there's no statute of limitations on tax fraud.

4. Remember, the IRS is not always correct. The tax code is not always black and white. There is a lot of room for interpretation. So you don't want to takes the IRS' position at face value.  And even if they propose adjustments, you can always file an appeal.

5. There are options for resolution. If you owe money to the IRS as a result of an audit, payment can be made over time by requesting an installment agreement. Or you can make an "offer in compromise" which could reduce the amount owed. (Less than a third of these offers are accepted.) Going to tax court is a last resort.

Take the IRS seriously and respond appropriately -- or get professional help. That's the only way you stand a chance. And that's The Savage Truth.

Ten Things to Know about Identity Theft and Your Taxes

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Learning you are a victim of identity theft can be a stressful event. Identity theft is also a challenge to businesses, organizations and government agencies, including the IRS. Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.
Many times, you may not be aware that someone has stolen your identity. The IRS may be the first to let you know you’re a victim of ID theft after you try to file your taxes.
The IRS combats tax-related identity theft with a strategy of prevention, detection and victim assistance. The IRS is making progress against this crime and it remains one of the agency’s highest priorities.
Here are ten things to know about ID Theft:
1. Protect your Records.  Do not carry your Social Security card or other documents with your SSN on them. Only provide your SSN if it’s necessary and you know the person requesting it. Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for Internet accounts.
2. Don’t Fall for Scams.  The IRS will not call you to demand immediate payment, nor will it call about taxes owed without first mailing you a bill. Beware of threatening phone calls from someone claiming to be from the IRS. If you have no reason to believe you owe taxes, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.
3. Report ID Theft to Law Enforcement.  If your SSN was compromised and you think you may be the victim of tax-related ID theft, file a police report. You can also file a report with the Federal Trade Commission using the FTC Complaint Assistant. It’s also important to contact one of the three credit bureaus so they can place a freeze on your account.
4. Complete an IRS Form 14039 Identity Theft Affidavit.  Once you’ve filed a police report, file an IRS Form 14039 Identity Theft Affidavit.  Print the form and mail or fax it according to the instructions. Continue to pay your taxes and file your tax return, even if you must do so by paper.
5. Understand IRS Notices.  Once the IRS verifies a taxpayer’s identity, the agency will mail a particular letter to the taxpayer. The notice says that the IRS is monitoring the taxpayer’s account. Some notices may contain a unique Identity Protection Personal Identification Number (IP PIN) for tax filing purposes.
6. IP PINs.  If a taxpayer reports that they are a victim of ID theft or the IRS identifies a taxpayer as being a victim, they will be issued an IP PIN. The IP PIN is a unique six-digit number that a victim of ID theft uses to file a tax return. In 2014, the IRS launched an IP PIN Pilot program. The program offers residents of Florida, Georgia and Washington, D.C., the opportunity to apply for an IP PIN, due to high levels of tax-related identity theft there.
7. Data Breaches.  If you learn about a data breach that may have compromised your personal information, keep in mind not every data breach results in identity theft.  Further, not every identity theft case involves taxes. Make sure you know what kind of information has been stolen so you can take the appropriate steps before contacting the IRS.
8. Report Suspicious Activity.  If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.
9. Combating ID Theft.  Over the past few years, nearly 2,000 people were convicted in connection with refund fraud related to identity theft. The average prison sentence for identity theft-related tax refund fraud grew to 43 months in 2014 from 38 months in 2013, with the longest sentence being 27 years.   During 2014, the IRS stopped more than $15 billion of fraudulent refunds, including those related to identity theft.  Additionally, as the IRS improves its processing filters, the agency has also been able to halt more suspicious returns before they are processed. So far this year, new fraud filters stopped about 3 million suspicious returns for review, an increase of more than 700,000 from the year before.
10. Service Options. Information about tax-related identity theft is available online. The IRS has a special section on IRS.gov devoted to identity theft and a phone number available for victims to obtain assistance.
For more on this Topic, see the Taxpayer Guide to Identity Theft.