Small Business Health Care Insurance Reimbursements

Many small businesses  reimburse employees for some or all of their individual health insurance premiums as opposed to establishing their own health insurance plan. Beginning 7/1/2015 this is no longer an option due to new IRS regulations. The penalty is $100 a day in excise tax per employee up to $500,000 per company for any size company. S Corporations are exempt through the end of 2015. Bills have been introduced in the House and Senate to remedy the situation but nothing has happened yet.

Social Security for 2016- No Increase

Social security recipients will not receive a cost of living adjustment benefit increase in 2016 because of low inflation this year. This is only the third time in 40 years that payments won't change.  Also payments for Medicare Part B coverage will increase by about $54 a month for all those with higher incomes and those that don't have the coverage deducted from their social security payments. About 30% of Medicare beneficiaries will pay the premium increase.

Late Filing Penalty

The IRS penalty for failure to file a return is pretty stiff. It is 5% of the amount of tax due per month or part of a month up to a maximum of 25%. If you don't owe any tax, then there is no penalty. If the return is more than 60 days late, then there is even a minimum penalty of $135 or tax due. The extended due date of the 2014 individual return is this Thursday October 15, and after that this penalty comes into play if you haven't filed a return for 2014.

Deducting Vehicle Expense

The IRS allows you to to take the greater of actual costs or the standard mileage rate which is 57.5 cents for 2015 for cars driven for business. Commuting is not considered business use per the IRS. I recommend that most business owners use the standard mileage rate since it is so much easier to keep up with if they are using their cars less than 50% for business or think that they may in the future. Once you pick the actual cost method for a car, you can't switch later to the standard mileage rate. The information needed to deduct vehicle expense each year under the standard mileage rate is total miles driven, total business miles, and date vehicle is placed in service. You need to keep some sort of contemporaneous record to track your business miles each year. I use a quickbooks function to keep up with mine. One of my clients just lost their entire deduction for business use of a vehicle because they didn't have any supporting records in a recent IRS audit.