Wednesday, December 19, 2018

Explanation: Obamacare Ruled Unconstitutional

UPDATE:  A federal judge has ruled the Affordable Care Act (ACA or Obamacare) is unconstitutional because Congress, in the Tax Cut and Jobs Act, eliminated the tax penalty under the individual mandate for those who do not maintain health care insurance. The case is likely to go the Supreme Court.

Explanation: Under the USA constitution the federal government is supposed to be completely limited to doing things and passing laws that fall under one of several specific things and categories specifically listed in the constitution.  It is supposed to be a government of "enumerated powers", as opposed to a government of general and unlimited powers.  Among the enumerated powers of the federal government are, in general, the exclusive right to handle mail, regulate interstate commerce, and levy certain types of taxes.

Obamacare contains a provision which provides everyone must buy health insurance.  And not just any health insurance but only the specific kind of health insurance designed by the government.  This part of Obamacare that requires everyone to buy health insurance is referred to as the "individual mandate".  Obamacare as originally passed also contained a provision that penalized any person who didn't obey the individual mandate by failing to buy the government mandated health insurance policy.  That penalty was to be collected by the IRS.

Obamacare was originally challenged in court as being unconstitutional because the individual mandate didn't fit under any enumerated power of the federal government.  Specifically, it was argued that it didn't fit under the federal government's power to regulate INTERSTATE COMMERCE. 

The Supreme Court agreed the individual mandate was not a proper application of the government's power to regulate interstate commerce, and would, if not saved by something else, be unconstitutional.  The Supreme Court found that something else in the enumerated power of the federal government to levy taxes.  The Supreme Court ruled the penalty for failing to obey the law regarding the individual mandate was in reality a valid tax under the government's taxing authority.  The court reasoned that the penalty was a valid tax, and the individual mandate was so tied to that tax that it was constitutional as a part of the federal government's enumerated power to levy certain kinds of taxes.  (Note:  I'm just summarizing what happened in the Supreme Court.  I'm not saying I think it was correct or logical or not completely crazy and off the wall).

Since that decision in the Supreme Court however, the Tax Cut And Jobs Act was passed under President Trump.  Part of that law repealed the Obamacare penalty/tax that the Supreme Court relied upon to say the individual mandate was constitutional. 

So after the Tax Cut And Jobs Act Obamacare continues to have the individual mandate that requires by law that everyone must buy government specified health insurance.  BUT, the tax penalty for not obeying the individual mandate no longer exists.  Since that tax no loner exists, it can no longer be argued that the individual mandate is constitutional under the enumerated power to levy certain taxes. 

Since the Tax Cut And Jobs Act the individual mandate must stand on its own.  The Supreme Court has previously ruled it can't stand under the enumerated power to regulate interstate commerce.  So unless the Supreme Court invents a new word game/fiction to find another enumerated power to support the individual mandate, the individual mandate is unconstitutional because it does not fall under one of the federal government's enumerated powers in the constitution.

Finally, the court in Fort Worth ruled that the individual mandate was so important to and so integral to all of Obamacare as a whole that it could not be separated from Obamacare as a whole.  That means if the individual mandate is unconstitutional and it can't be severed from Obamacare as a whole, then all of Obamacare must be thrown out as unconstitutional.
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Tuesday, December 18, 2018

IRS Issues Standard Mileage Rate Deductions For 2019


The Internal Revenue Service issued the 2019 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.




Beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
  • 58 cents per mile driven for business use, up 3.5 cents from the rate for 2018,
  • 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018, and
  • 14 cents per mile driven in service of charitable organizations.
The business mileage rate increased 3.5 cents for business travel driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate is set by statute and remains unchanged.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Notice-2019-02.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other limitations are described in section 4.05 of Rev. Proc. 2010-51.

Notice 2018-02, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

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IRS Tax Reminder: December 31 Deadline To Make Required Minimum Distributions From IRA - 401K Plans


IRS reminder: Deadline Dec. 31 for most retirees who must make required retirement plan distributions



The Internal Revenue Service reminded retirees born before July 1, 1948, that they usually must take distributions from their individual retirement arrangements (IRAs) and workplace retirement plans by Dec. 31.

The payments, called required minimum distributions (RMDs), are normally made by the end of the year. Those who reached age 70½ during 2018 are covered by a special rule that allows them to wait until April 1, 2019, to take their first RMDs.  This means that those born after June 30, 1947, and before July 1, 1948, are eligible for this special rule for 2018. If they wait until early 2019 to take that first RMD (up until April 1, 2019), it can be counted toward their 2018 RMD, but is still taxable in 2019.

The special April 1 deadline only applies to the RMD for the first year. For all subsequent years, the RMD must be made by Dec. 31. So, for example, a taxpayer who turned 70½ in 2017 (born after June 30, 1946, and before July 1, 1947) and received the first RMD (for 2017) on April 1, 2018, must still receive a second RMD (for 2018) by Dec. 31, 2018.

Types of retirement plans requiring RMDs
The required distribution rules apply to owners of traditional, Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs. Roth IRAs don’t require distributions while the original owner is alive. RMDs also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.
An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2018 RMD, this amount is on the 2017 Form 5498 normally issued to the owner during January 2018.

An IRA owner must calculate the RMD separately for each IRA they own, but can withdraw the total amount from one or more of the IRAs. However, RMDs required from workplace retirement plans (like 401(k), 403(b), and 457(b) plans) have to be taken separately from each of those plan accounts.
 
IRS online forms and publications can help
The RMD for 2018 is based on the taxpayer’s life expectancy on Dec. 31, 2018, and their account balance on Dec. 31, 2017. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Use the online worksheets on IRS.gov or find worksheets and life expectancy tables to make this computation in the Appendices to Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).
For most taxpayers, the RMD is based on Table III (Uniform Lifetime Table) in IRS Publication 590-B. So, for a taxpayer who turned 72 in 2018, the required distribution would be based on a life expectancy of 25.6 years. A separate table, Table II, applies to a taxpayer whose spouse is more than 10 years younger and is the taxpayer’s only beneficiary.

Though the RMD rules are mandatory for all owners of traditional, SEP and SIMPLE IRAs and participants in workplace retirement plans, some people in workplace plans can wait longer to receive their RMDs. Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulations in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.
Find more information on RMDs, including answers to frequently asked questions, on IRS.gov.

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Monday, December 10, 2018

Startups And Founders NOTE: Now besides making a Section 83(b) election most also get a Section 83(i) election


For private corporations and their employees, IRS provides initial guidance on new tax benefit for stock options and restricted stock units

The Internal Revenue Service issued Notice 2018-97 offering guidance on a recent tax law change that allows qualified employees of privately-held corporations to defer paying income tax, for up to five years, on the value of qualified stock options and restricted stock units (RSUs) granted to them by their employers.
The tax law change was included in the 2017 Tax Cuts and Jobs Act (TCJA). In general, executives, highly-compensated officers and those owning one percent or more of the corporation’s stock cannot make the deferral election. Federal Insurance Contributions Act (FICA) tax and Federal Unemployment Tax Act (FUTA) tax payable on the value of qualified stock may not be deferred.

Notice 2018-97, posted today on IRS.gov, offers initial guidance taxpayers can rely on until proposed regulations are issued and requests public comment on additional issues that should be addressed in those regulations.
Updates on this and other TCJA provisions can be found on the Tax Reform page of IRS.gov.

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IRS Increases Interest Rates for the First Quarter of 2019



The Internal Revenue Service announced that interest rates will increase for the calendar quarter beginning January 1, 2019.  The rates will be: 



  • six (6) percent for overpayments [five (5) percent in the case of a corporation];
  • three and one-half (3.5) percent for the portion of a corporate overpayment exceeding $10,000;
  • six (6) percent for underpayments; and
  • eight (8) percent for large corporate underpayments. 
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during October 2018 to take effect November 1, 2018, based on daily compounding.

Revenue Ruling 2018-32, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2018-51, dated December 17, 2018.

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