Monday, December 19, 2016

CURE Act and Year End Law Changes

The end of 2016 has seen a flurry of last minute Tax bills signed by the President and IRS Notices updating various items. The big change of course is the new CURE Act which makes sweeping modifications of small business health care plans for 2017.
  • The 21st Century Cure Act allows a new small business HRA for qualified reimbursements of medical costs starting 01/01/2017, with a waiver of the $100 daily penalty prior to that date for many plans. The new rules allow, within guidelines, employers to reimburse up to $10,000 family ($4,950 individual) in annual costs for employee insurance and medical care. Many planning opportunities are available for small businesses, but several traps also apply such as an inability to reimburse employees who choose not to participate in an employee sponsored group plan.
  • In Notice 2016-79, the IRS issued the 2017 optional standard mileage rates used to calculate the deductible cost of operating an automobile for business, charitable, medical or moving expenses. The IRS also issued the amount taxpayers must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate plan. Beginning on January 1, 2017, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) will be:
    • 53.5 cents per mile driven for business purposes;
    • 17 cents per mile for medical or moving purposes; and
    • 14 cents per mile driven in service of charitable organizations.
  • In IRS Info 2016-0051, the IRS advised that because participation in a healthcare sharing ministry is not employer-provided coverage under an accident or health plan, an employer's payment to the HCSM will be taxable income and wages to the employee.
  • On 12/16/2016, the President signed the Combat-Injured Veterans Tax Fairness Act which extends the time that veterans who were separated from service for combat-related injuries and that had taxes improperly withheld from their severance pay, have to file amended returns and claim refunds for such taxes.
The Combat-Injured Veterans Tax Fairness Act of 2016 directs the Department of Defense (DOD) to identify certain severance payments to veterans with combat-related injuries paid after January 17, 1991 from which DOD withheld amounts for tax purposes. Once such veterans are identified, the DOD must provide the identified veteran with a notice of the amount of improperly withheld severance payments, and instructions for filing amended tax returns to recover such amount.

While the statute of limitations for  filing a refund claim is generally three years from the date the return is due or the date the return is filed, the Veterans Tax Fairness Act of 2016 extends the period of time for filing a severance-related claim to the date that is one year after DOD provides the veteran with the relevant information to file an amended return. The Act further requires that, in the future, the DOD ensure that amounts are not withheld for tax purposes from DOD severance payments to individuals when such payments are not considered gross income.

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