Bill Would Extend COBRA Coverage by Six Months

The Extended COBRA Continuation Protection Act of 2009 (H.R. 3930) has been introduced to extend by six months the maximum COBRA continuation coverage period. See www.dcemploymentlawupdate.com/2009/10/articles/employee-benefits/bill-would-extend-cobra-coverage-by-six-months/

WHAT IS COBRA?
COBRA stands for Consolidated Omnibus Budget Reconciliation Act. It was passed by congress in 1986 which amended the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise would be terminated do to the of employment. It covers former employees and retirees as well as their spouses and dependent children. It provides the right to temporary continuation of health coverage at group rates. The coverage is extended to18 months for the person whose employment ended [in some cases 36 months in the case of death or divorce]. The coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer formerly paid a part of the premium. It is ordinarily less expensive, though, than individual health coverage. This can be a burden for the person who unexpectedly loss employment for it creates an unexpected financial burden; they not only loose income but health care expenses increase due to the former employee paying the former employer’s share of health insurance.

The American Reinvestment and Recovery Act [ARRA] passed in February 2009 gave relief to employees who lost their job as a result on the recession from September 1, 2008 to December 31, 2009. It gave eligible individuals a 65% subsidy on the COBRA premiums. The Federal government through a tax credit on the payroll tax returns would reimburse the former employers.

WHEN WILL IT END?
The subsidy as part of ARRA is to end on December 31, 2009. However, the Extended COBRA Continuation Protection Act of 2009 would extend COBRA benefits in three ways. First, the bill would extend from 9 to 15 months the total allowable time an unemployed worker can receive COBRA premium assistance. Second, the bill extends this assistance to individuals who are involuntarily terminated between January 1 and June 30, 2010. Third, it would extend eligibility for traditional COBRA coverage an additional 6 months, from 18 to 24 months, for individuals terminated at the beginning of the economic recession in 2008. No extended COBRA premium assistance or extended COBRA benefits would extend beyond December 31, 2010.

HOW DOES THIS AFFCT EMPLOYES/EMPLOYERS?
This will be a tremendous assistance to employees who lost their job as the result of the recession. With more people, being added to the unemployment rolls and more people applying for extended unemployment benefits, extending the subsidy and including people who lost employment after December 31, 2008 can make a big difference in their health and the health of their families.

This should have no impact on most employers for they reduce by the amount of the subsidy the payroll tax liability on the quarterly payroll tax returns and payroll tax deposits during the quarter.

ANYTHING EMPLOYEES SHOULD DO BEFORE THE END OF THE YEAR?
The only thing employees should do is to stay in contact with the COBRA administer. For many companies that is a company hired specifically for administrating COBRA premiums and not the HR department of the company. The employee should automatically get communications from the administrator, but it is a good practice for the employee to be proactive and find out who the COBRA administrator is. Giving them a call is a good way to make sure the employee does not “fall in-between the cracks”

Contact me for more information or visit me on the web at www.TheJohnEllisCompany.com

UPDATE OF TAX AND BENEFIT BILLS MOVEING THOUGH CONGRESS

FIRST TIME HOME BUYER CREDIT
Currently the $8,000 tax credit will expire on November 30, 2009. Congress is expected to extend the expiration date to January 31, 2010 and there will not be a requirement for the sale to be completed, just a signed contract. There is extra relief for members of the Armed Forces who are not able to take the credit because of extended duty overseas; they have until the end of 2010. There are amendments to include people who are not first time home buyers and increase the credit to $15,000, but not expected to pass

MEDICARE PART B PREMIUMS
The increase in higher Medicare Part B premiums is expected to be blocked by Congress. In addition an extra payment to beneficiaries is expected be OK’d this fall of $150 to $250 per beneficiary.

UNEMPLOYMENT BENEFITS
It appears an extension of unemployment benefits for 13 weeks is a done deal. This will help those who have had been unemployed more then 12 months. However to pay for this an additional 0.2% Federal unemployment surtax on employers will be extended for one year through 2010.

OTHER INCOME TAX BREAKS TO BE EXTENDED
Research and Development Tax Credit, write-offs for state sales tax, college tuition, and teachers’ classroom supplies and tax-free IRA payouts to charity are expected to be extended through 2010

INCOME TAX BREAKS TO RE REPEALED
Waver of mandatory payouts from IRAs and plans for people over 70 ½ and the repeal of the estate tax. Currently the estate tax is to disappear in 2010 and Congress is expected to keep it. However, the $3.5 million exemption for 2009 will be kept as well as the estate tax rate of 45%.

AMT EXEMPTIONS
AMT exemptions are expected to be raised so they will not revert to pre-2001 levels.

For more information, call John Ellis CPA at The John Ellis Company [310-426-2101]

APPLYING TO BE AN EXEMPT ORGANIZATION WILL COST MORE NEXT YEAR.

Applications to the IRS postmarked January 3, 2010 or later will require a $400 fee in lieu of the current fee of $300 if gross receipts are $10,000 or less. If gross receipts are over $10,000 the fee charged by the IRS will be $850, up from $750. However if the application is made over the internet, the fee will be only $200, regardless of size. The IRS new Web based system is NOT yet up and running but they say it will be sometime in 2010.

COURT RULES AGANST CONCERT PIANIST

A district court ruled that a concert pianist cannot deduct the cost of fancy clothing that she wore while performing. She shopped at high-end stores for special gowns, dresses, shoes and jewelry to wear only at concerts and deducted the cost as business expenses. She did not wear the items outside of the concert hall. The court disallowed the deduction because other people wear similar clothing in other settings [Tilman, D.C., N.Y.]

8 Tips for Taxpayers Who Owe Money to the IRS

The vast majority of Americans get a tax refund from the IRS each spring, but what do you do if you are one of those who received a tax bill? Here are eight tips for taxpayers who owe money to the IRS.

If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any additional penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.

You can also pay the bill with your credit card. To pay by credit card contact either Official Payments Corporation at 800-2PAYTAX (also www.officialpayments.com) or Link2Gov at 888-PAY-1040 (also www.pay1040.com).

The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code.

You can also pay the balance owed by electronic funds transfer, check, money order, cashier's check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or 800-945-8400 or online at www.eftps.gov.

An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS for the collection of the amount due in monthly installment payments. To be eligible for an installment agreement, you must first file all returns that are required and be current with estimated tax payments.

If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the web-based application called Online Payment Agreement found at IRS.gov.

You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the monthly amount you wish to pay with your request. At a minimum, the monthly amount you will be allowed to pay without completing a Collection Information Statement, Form 433, is an amount that will full pay the total balance owed within 60 months.

You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.

If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged, and is automatically figured based on your income.

For more information about installment agreements and other payment options call us at 310-426-2101 or visit the IRS Web site at IRS.gov.

Clean Energy Equipment Tax Credits Ending Soon

The Sept. 16 deadline is nearing for submitting a preliminary application for the federal government’s Section 48C tax credit program for manufacturers of clean energy equipment.

The American Reinvestment and Recovery Act authorizes the Treasury Department to award $2.3 billion in tax credits for qualified investments in advanced energy projects to support new, expanded or re-equipped domestic manufacturing facilities. The $2.3 billion will be distributed via a new program that provides an investment tax credit of 30 percent for manufacturers of particular types of energy equipment and materials.

The credits will support an estimated $7.7 billion in total capital investments in new renewable and advanced energy-manufacturing projects. The tax credit will apply to manufacturing facilities that support generation and conservation, but not the energy generation projects themselves, which are being supported by separate tax incentive programs.

For more information call John Ellis CPA at The John Ellis Company [310-426-2101]

New Credit Card Scam

This article was posted on snopes.com

This [fraud] is pretty slick since they provide YOU with all the information, except the one piece they want.

The callers do not ask for your card number; they already have it... One of our employees was called on Wednesday from 'VISA', and I was called on Thursday from 'Master Card'.. The scam works like this:

"This is (name), and I'm calling from the Security and Fraud Department at VISA. My Badge number is 12460. Your card has been flagged for an unusual purchase pattern, and I'm calling to verify. This would be on your VISA card which was issued by (name of bank). Did you purchase an Anti-Telemarketing Device for $497.99 from a Marketing company based in ?"

When you say 'No', the caller continues with,

"Then we will be issuing a credit to your account. This is a company we have been watching and the charges range from $297 to $497, just under the $500 purchase pattern that flags most cards. Before your next statement, the credit will be sent to (gives you your address), is that correct?"

You say 'yes'. The caller continues:

"I will be starting a Fraud investigation. If you have any questions, you should call the 1- 800 number listed on the back of your card (1-800 -VISA) and ask for Security. You will need to refer to this Control Number. The caller then gives you a 6 digit number. 'Do you need me to read it again?"

Here's the IMPORTANT part on how the scam works.

The caller then says, 'I need to verify you are in possession of your card'. He'll ask you to 'turn your card over and look for some numbers'. There are 7 numbers; the first 4 are part of your card number, the next 3 are the security Numbers that verify you are the possessor of the card. These are the numbers you sometimes use to make Internet purchases to prove you have the card. The caller will ask you to read the 3 numbers to him. After you tell the caller the 3 numbers, he'll say, 'That is correct, I just needed to verify that the card has not been lost or stolen, and that you still have your card. Do you have any other questions?' After you say No, the caller then thanks you and states, 'Don't hesitate to call back if you do, and hangs up.

You actually say very little, and they never ask for or tell you the Card number.. But after we were called on Wednesday, we called back within 20 minutes to ask a question.. Are we glad we did! The REAL VISA Security Department told us it was a scam and in the last 15 minutes a new purchase of $497.99 was charged to our card.

Long story - short - we made a real fraud report and closed the VISA account. VISA is reissuing us a new number. What the scammers want is the 3-digit PIN number on the back of the card Don't give it to them. Instead, tell them you'll call VISA or Master card directly for verification of their conversation. The real VISA told us that they will never ask for anything on the card as they already know the information since they issued the card! If you give the scammers your 3 Digit PIN Number, you think you're receiving a credit. However, by the time you get your statement you'll see charges for purchases you didn't make, and by then it's almost too late and/or more difficult to actually file a fraud report.

What makes this more remarkable is that on Thursday, I got a call from a 'Jason Richardson of Master Card' with a word-for-word repeat of the VISA scam. This time I didn't let him finish. I hung up! We filed a police report, as instructed by VISA. The police said they are taking several of these reports daily! They also urged us to tell everybody we know that this scam is happening.