This month’s newsletter discusses the recent federal rule changes impacting salaried employees who will be entitled to overtime pay in late 2016. There is also information to help protect a recently departed loved one’s identity from being stolen. These articles, plus recent announcements from the IRS regarding audit rates, and new Health Savings Account (HSA) limits for 2017 round out this month’s newsletter.
Should you know of someone who may benefit from this information please feel free to forward this newsletter to them.
Ghosting Identity Theft
To most people “ghosting” is the act of breaking up with a boyfriend or girlfriend by breaking off all contact. Now there is a new ghosting phenomena; stealing the identity of a recently deceased loved one.
Would-be identity thieves scour obituaries to find as much personal information as possible about the recently departed. The more information available about the loved one the better. With this information, thieves can make purchases, open credit cards, create false IDs, and file fraudulent tax returns. This activity can go unchecked until all the proper paper work is filed on the deceased. It can be a nightmare to clear up the mess, all while dealing with the grief associated with losing someone close to you.
What can be done
There are actions available to reduce the risk of this happening.
Fortunately, as long as your name is not on the accounts, family members are rarely liable for any illegal activity. But cleaning up the mess can be a real hassle.
New Overtime Rules
On May 18, 2016 President Obama and Labor Secretary Perez announced new Department of Labor overtime regulations that go into place December 1, 2016. The Federal Labor Standards Act (FLSA) has information everyone needs to know to comply with these new rules.
What this means to you
No matter what the pundits say, the true impact of this change is unknown. The only certainty is that all employers now face additional administrative duties and potential legal action for non-compliance. This includes businesses, schools, and non-profit organizations. What is important at this point is to be aware of the upcoming change and plan for it.
The Chances of Being Audited
What are the Chances?
Every year the IRS publishes the statistics on the number of tax returns they are examining. Provided here are the last three years of published information and a look back to 2008 to see any trends:
|Percent of Individual Tax Returns Audited|
|Fiscal Year Year||2015||2014||2013||2008|
|All Individual Tax Returns||0.84%||0.86%||0.96%||1.00 %|
|No Income (AGI)||3.78%||5.26%||6.04%||2.15%|
|Income under $25,000||1.01%||.93%||1.00%||.90%|
|$25,000 – 50,000||.50%||.54%||.62%||.72%|
|$50,000 – 75,000||.47%||.53%||.60%||.69%|
|$75,000 – 100,000||.49%||.52%||.58%||.69%|
|$100,000 – 200,000||.64%||.65%||.77%||.98%|
|$200,000 – 500,000||1.54%||1.75%||2.06%||1.92%|
|$500,000 – $1 million||3.81%||3.62%||3.79%||2.98%|
|$1 million – $5 million||8.42%||6.21%||9.02%||4.02%|
|$5 million – 10 million||19.44%||10.53%||15.98%||6.47%|
|$10 million and over||34.69%||16.22%||24.16%||9.77%|
|Note: These audit rates are stated as a percent of total tax returns in each Adjusted Gross Income (AGI) class as claimed on individual tax returns. In general the examinations are for tax returns filed in the previous calendar year.
Source: IRS Data Books
|Overall, you have less than 1 out of 100 chance of being selected for an audit. The .84% audit rate is down .02% versus 2014.|
|The IRS is continuing its focus on returns with no AGI or negative income. This group’s 3.78% audit rate is down versus last year, but is still significantly higher than the 2.15% audit rate in 2008.|
|The IRS continues its focus on who pays the income tax. Those with incomes over $500,000 continue to have audit rates significantly higher than in 2008.|
|Over 1/3 of those with incomes over $10 million were faced with an audit.|
Having good records
|Your best defense in case of an audit is retaining adequate records for as long as you need them. This includes retaining copies of original tax returns and any supporting documentation. Please keep all receipts, statements and cancelled checks that support any tax return entry. Also retain legal documents, confirmation of asset purchases, asset sales, real estate transactions, mileage logs, and informational tax forms. Remember the IRS can audit your tax return for three years after the later of the filing date or when you filed your tax return. This time-frame is six years if your income is understated by more than 25%. Include any state record retention requirements as you review when it is safe to destroy old records. This can add one to two years to your recordkeeping requirements.|
2017 Health Savings Account Limits Announced
|The savings limits for the ever-popular Health Savings Accounts (HSA) are now set for 2017. The new limits are outlined here with current year amounts noted for comparison purposes.
What is an HSA?
An HSA is a tax-advantaged savings account to pay for qualified health care costs for you, your spouse, and your dependents. When contributions are made through an employer, they are made on a pre-tax basis. There is no tax on the withdrawn funds, the interest earned, or investment gains as long as the funds are used to pay for qualified medical, dental, and vision expenses. Unused funds may be carried over from one year to the next. To qualify for this tax-advantaged account you must be enrolled in a “high deductible” health insurance program as defined by HSA rules.
|Health Savings Account (HSA) Limits||NEW! 2017||2016||Change|
|Maximum Annual Contribution||Self||$3,400||$3,350||+$50|
|Add: 55+ catch up
|Health Insurance Requirements|
|Minimum Deductible||Self coverage||$1,300||$1,300||nc|
|Out-of-pocket Maximum||Self coverage||$6,550||$6,550||nc|
Source: IRS Rev Proc 2016-28
Note: To qualify for an HSA you must have a qualified High Deductible Health Plan (HDHP). A plan must meet minimum deductible requirements that are typically higher than traditional health insurance. In addition, your coverage must have reasonable out-of-pocket payment limits as set by the above noted maximums.
Not sure what an HSA is all about? Check with your employer. If they offer this option in their health care benefits, they will have information discussing the program and its potential benefits.
As always, should you have any questions or concerns regarding your situation please feel free to call.
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