Medlin Software, Dennis

Likely already considered by the client - but with certain state regulations (net metering type rules), Southern exposure may not even be the most ideal.  For instance, in CA, with the soon implementation of our NEM3, W and/or WSW may be the most beneficial for the home owner.  It is not as simple as Southern pays, as Western can be "the" win for TOU plans.

For the company to properly handle: Added to gross pay.  As allowed by statue, excluded from certain taxes such as likely SS, Medi, and UI). I have seen nothing which allows exclusion from garnishments, such as child and spousal support (sadly, something which seems to get overlooked as the family services folks likely do not dig deep enough).

So yes, other than specifically excluded items, the amount is remuneration, and taxable/reportable.  Thus the what I call "game" of only adding it to the W2 is not proper.

Whether the owner/emplyoee handles the amount, when properly reported, as an above the line deduction, is up to the owner/employee.

2008-1:

"Accident and health insurance premiums paid or furnished by an S corporation
on behalf of its 2-percent shareholders in consideration for services rendered are
treated for income tax purposes like partnership guaranteed payments under § 707(c) of
the Code. Rev. Rul. 91-26, 1991-1 C.B. 184."

"The 2-percent
shareholder is required to include the amount of the accident and health insurance
premiums in gross income"

That the amount may be an above the line deduction does not mean it was not reportable and taxable income, upon constructive receipt, and does not allow any special exception for paper handling via a once a year entry.

The notice which started this issue was "incomplete". It reflected only a small part of the ramifications of the notice.  Thus, the proper handling is left up to interpretation.  ACA added complexity as well.

The keys are the amount (if eligible) is considered remuneration.  What most miss is remuneration are taxable and reportable as earned (benefited from), so this really leaves out annual adjustments (although I know of no enforcement reports).  For me, I include a proportional amount on each paycheck for ease of processing.  It raises withholding, but the employee could submit a revised W4.

There is nothing prohibiting reimbursement, within ACA allowed circumstances.

The employer knew. Unless the person was commuting somehow, they knew the person was not working in CA. 

Same old same old. Getting employers to change could result in dismissal.

If one wants to go that way, offer the employer one chance to rectify, then move on. I used to think ignorance was the usual reason, but it has drifted to known non compliance.

Nexus issues will get worse over time as states increase efforts to use obscure rules to increase income (recover lost income?).

Often times, the TPSP provider does not withhold, and neither does the employer. Thus two W2’s are normal, and under withholding is as well. 

PA taxes retirement contributions (no deferral) so a full PA year with day a 401k will show PA taxable wages higher than federal. 

https://www.irs.gov/credits-deductions/manufacturers-and-models-for-new-qualified-clean-vehicles-purchased-in-2022-and-before

So many believe they do better not paying RC and payroll taxes, versus a good long healthy contribution to SS...  While it does not come up often among my customers, I have yet to hear from one who was doing better with their investments over SS, as many seem to skirt RC.  I share this as often as I can.  In the last couple of decades (maybe longer?), SS is still a better "deal" for the average person.  What often gets overlooked is coverage for non working spouses, disability, survivor benes, and how a disabled child/adult can transition from SSI to SSDI when a parent claims SS (or on death).  I have a huge bias - to be clear.  My grandmother collected well from SS for 50 years.  I was a survivor bene recipient.  I have a non working spouse.  I have a disabled child/adult - who will likely draw SSDI from my record for 30-40 years (a significant "raise" from SSI, and with no means test).

G2R’s quote actually has the answer for RC. “Remuneration”. This means they insurance counts towards RC since is is money received because of employment. Remuneration is the term to stand on, and their definition is favorable.

back when we got our first mortgage I was an employee only. The lender said we did not have enough income. “Suddenly” I had a new stub with no Section 125 (health insurance) and that same amount added to taxable wages. I also had a letter from employer stating I declined Section 125 going forward. Silly exercise, but it worked. 

11 hours ago, Lion EA said:

So, HI in Box 1 does NOT help an employee/shareholder meet RC, because no SS/Medicare is being paid on HI.

Depends on who is asking and how the owner/employee replies.

Mortgage lender, does not likely count Section 125 or S corp insurance. Other lenders, make them define what they are asking for and they may ask for Box 1 earnings.

I push to include health premiums as pay. I am going to have insurance, pre tax or not, so why should I be punished (lower countable pay) just because I can avoid taxes on the premiums.

For those trying to just meet RC, this is a real issue to ponder since their premiums could be 20k plus (family).

Windows Task Manager is also a fair way to see what is running.

History and fact. Most of the issues with preloading and startup are user caused. What I mean is devs are inclined to preload to lower customer complaints about software startup speed. Same reason we (computer users) still, since Windows 3.1, have issues with lost data from power interruptions (disk caching enabled). Disk caching is when the OS loads memory with what it thinks can be safely handled later.  Exactly like a child promising to get chores done now, when the child really means they will try to get them done before they get caught.

Then, add in networking, and you get unexpected delays from another machine, and just plain delays from the OS checking and waiting to see if other machines are connected, and complication exponentially grows. 

Correct, depending on the vehicle. The unknown is when the battery spec restrictions will start. 

I think GM had met the volume restrictions and was ineligible. Jan 1, 2023 the volume restriction went away. Currently, we are in a time/loophole window while the battery restrictions are being developed and published  

Written as I smile while waiting to pickup  our new Tesla. The 9500 total (fed and state) credit /rebate was too much to ignore. 

1 hour ago, cbslee said:

While the IRS pronouncement may make practical sense, it's logical basis under tax law is questionable.

IRS and logical in the same sentence...  Not good to see/read while eating!

Feb 14, and I am still dealing with folks who do not understand that 0 withholding can be proper, than there was a HUGE adjustment to the withholding brackets for 2023, and the prior W4 "change" is still biting many employees.

I get the same every year when I look back to remember how to reverse distributions.  It is the once a year items which I have to be careful of.  It has taken be decades to let go of Dr and Cr entry "speak", and just think of where it is going and where it came from (like my customers think).

Too many unknowns to get the full picture. SSI could be an issue (means test).  Money put into ABLE or not?

Dealing with finances of someone likely receiving aid is a specialty, with very few one stop resources.

Since you did not say he gives all deposits from the December statement from his separate business account, and all cash/checks/cards go through said separate business account... (you likely know where I am going).

I do not miss shoe box accounting, writing checks, or using cash (for business).  Long live charge cards with rewards and their detailed monthly statements!

1 minute ago, JohnH said:

The more difficult part relates to what happens if the employer isn't pleased that the taxpayer opened this can of worms, as Medlin pointed out.  That's probably my greatest concern in this entire matter.  I'm thinking of declining the work based on that consideration alone.  

In this specific case, since the employer is in MA, probable more delicate than difficult.  I suspect an oversight, maybe belief the pandemic rules were still in place, maybe new payroll person.  Normally, I would pass.  But this case, I would share the options with the potential client and let them adult.  If they want to do it right, I would take it on.

3 minutes ago, cbslee said:

How do you file a NC return with less wages than shown on the W 2?

So are you going to have your client ask his employer to amend his W 2?

 

That’s the rub we have gone over here more than once. In this case, ot may be an oversight since the employer is based in MA. 

It is the reverse of the usual. The usual is an employee not providing accurate work location.

indeed, the employee should file their return properly.

the employee must carefully consider the ramifications of enlightening the employer. But, it may just be an oversight since the employer likely already has MA payroll nexus.

Another case of lifetime employment (dealing with these things) as there is zero chance all states will agree to any common sense rules for mobile employees. My usual advice is to assume each state taxes for one millisecond or all of them (in state) unless there is an exception. Even this can be sketchy in the case where more than one entity wants a bite.

On quick look, the answer appears to be yes, MA wants their bite. I did not see any allowance for a certain number of days per year to be ignored.

Pandemic created some exceptions, so look into those if they apply. 

Both states will want personal and business income tax, as much as they can get.

likely the employer did not consider the ramifications first, so it may require much back digging to apportion.

The recent discussion on MTC’s suggestions for modern take on 86-272 is going to be a long lasting nightmare. 

Those folks had regrets when trying to prove income for pandemic aid.   Vast difference for those who were honest vs those are who are on the darker side of gray. 

While is should go without saying, if there is any even .000001% of an opening to share appropriately, strongly suggesting getting a qualified probate attorney involved.  They can expedite things (court filings) and their fee will be sell spent money.  I've now done more intestate estates than most non-lawyers do (3), and they were each very complicated.  I still would not do so on my own.  Most are "scared" of the cost.  The cost in most/all? states, is et by statue, essentially the same amount the admin is eligible to be paid.