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In This Edition
American Health Care Act
Change to Wisconsin Filing Due Dates
Identifying Qualifying Children for Tax Purposes
You've Hit the Jackpot! Now what?
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A Plan to Repeal and Replace the Affordable Care Act
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Earlier this month, Republican congressional leaders unveiled a repeal and replacement plan for the Affordable Care Act (ACA). The GOP's American Health Care Act (AHCA) would eliminate most of the ACA's taxes, including the penalties connected with the individual and employer mandates, the net investment income (NII) tax, and the Additional Medicare tax. Left in place, although delayed, would be the excise tax on high-dollar health plans. Also left in place, would be a number of non-tax provisions related to scope of coverage, benefits and children. This includes allowing dependents to continue staying on their parents' plan until age 26, prohibiting health insurers from denying coverage or raising rates to patients based on pre-existing conditions, and forbidding life-time limits on insurance coverage.
The changes of the proposed AHCA include:
- Effective after December 31, 2017, the bill would repeal most taxes imposed under the ACA, including the Medicare tax on employees' wages or self-employment income, tax on indoor tanning services, annual fee on health insurers, excise tax on the sale of medical devices, and annual fee on certain brand pharmaceutical manufacturers.
- The 3.8% tax on certain net investment income of individuals and estates and trusts would end after December 31, 2017.
- The Cadillac tax would remain, but effective date is delayed until 2025.
- The individual and employer mandate would be eliminated, reducing the penalty to 0% for not having or offering health insurance, effective retroactively to January 1, 2016.
- Simplified reporting of employer offered health coverage would be on Form W-2, replacing Form 1095 filings.
- New refundable credit for individuals and small employers would be offered based on age and phases out for those making more than $75,000 for individuals or $150,000 for joint filers.
- Limits to health savings accounts (HSAs) would increase to at least $6,550 for self-only coverage and $13,100 for family coverage.
Click the link below for further information on the tax provisions included in the AHCA that's moving its way to becoming law.
 Contact: Greg Kenworthy, CPA
[email protected]
608.793.3141
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| Change to Wisconsin Filing Due Dates |
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The 2017 Wisconsin Act 2 was signed into law to conform Wisconsin's due dates with federal due dates for corporation and partnership income/franchise tax returns and corporate estimated tax payments. New due dates for 2016 forms can be found on the Wisconsin Department of Revenue website.
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Identifying Qualifying Children for Tax Purposes
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As you file your 2016 income tax return, you may be wondering whether you're eligible for tax breaks related to a niece who lives with you, or perhaps a stepson who spends only part of the year in your home. It all depends on whether, for federal tax purposes, that person is your "qualifying child."
Widely Applicable
In an effort to simplify the tax code and eliminate confusion, Congress established a uniform definition of "qualifying child" as part of the Working Families Tax Relief Act of 2004. The definition applies for purposes of several child-related tax benefits, such as:
- Dependency exemptions
- The child tax credit
- The child and dependent care credit
- Head-of-household filing status
The definition relies on residency rather than requiring that you have provided more than half of a dependent's support, as was the case years ago.
4 Tests to Pass
More specifically, a qualifying child must meet four tests:
- Relationship: The definition applies to your child (including one who's adopted or who's an eligible foster child), stepchild, brother, sister, stepbrother or stepsister. It also includes any of their descendants. So, for example, your grandchildren, nieces and nephews also qualify.
- Age: A child must be under age 13 when the care was provided to qualify for the child and dependent care credit, under age 17 (as of the end of the year) for the child credit and under age 19 (age 24 for a full-time student) for the other tax benefits. Except for the child credit, there's no age limit for a permanently disabled person.
- Residence: The child must share your principal place of abode for more than half the year, which includes time spent away from home because of school, military service or illness.
- Support: It's no longer necessary for you to provide more than half of a child's support. But the qualifying child generally can't provide more than half of his or her own support.
Under the current definition, the child must be a citizen or resident of the United States, Canada or Mexico to qualify. However, if the child files a joint return, he or she won't qualify. If more than one person claims a benefit with respect to the same child, the tax code specifies who's entitled to tax benefits.
If two or more people are eligible to claim the same child as a dependent, they can decide among themselves who will claim the tax benefits. In the event that more than one person actually claims those benefits, there are a variety of rules in place to break the tie.
Further questions
As you can see, the Internal Revenue Code recognizes that families take care of each other, and not every child claimed in relation to tax benefits will be a biological child. If you have further questions about this topic, please contact our firm.
 Contact:
Steve Albers, CPA
920.337.4520
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You've Hit the Jackpot! Now What?
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When it comes to financial planning, most of us spend our time guarding against things that could go wrong. But what if something really good happens? Hitting the jackpot is obviously a nice problem to have. Yet an unexpected influx of cash can drive even savvy individuals to do regrettable things.
Your first impulse upon experiencing a financial windfall may be to shout about it from the rooftops. But it's likely wiser to lie low and consider your options. A substantial sum of money could compel long-lost acquaintances and family to suddenly get in touch. And let's not even get into the identity theft risks.
Naturally, you'll need to consider the tax ramifications. There's no shortage of cautionary tales about the suddenly rich who've gotten into trouble with the IRS.
There are also family issues to consider. If you have minor children, you may want to establish trusts so that, should something happen to you, their finances will be well managed. Likewise, you may need to establish or rethink your estate plan to preserve family harmony and ensure your wishes are fulfilled after you die.
Reassess your insurance needs, too. Your newfound wealth may make you a bigger target for lawsuits should an accident occur on your property or while you're driving. Ask your insurance agent to review your existing coverage.
If good fortune has smiled upon you, please contact us. We can help ensure you don't underestimate the amount of taxes you'll have to pay, as well as assist you in planning your financial future.
 Contact: Jeff Tillema, CPA
[email protected]
608.793.3128
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