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All of us at R.S. Abrams & Co., LLP would like to wish you a Happy New Year! It is that time of the year when we issue our updated "New Developments, Year End Update and 1040 Considerations" for the year 2015. This brochure discusses the current changes affecting school districts, local governments, and not-for-profit organizations in the areas of accounting, auditing, tax, and legislative issues.
Below is a list of some of the most talked about topics affecting 2015.
To review a full copy of our "New Developments, Year End Update and 1040 Considerations", click here.
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On January 14, 2015, Governor Andrew M. Cuomo announced his proposed 2015 Opportunity Agenda which represents a $1.66 billion property tax credit program providing relief to homeowners and renters.
- The purpose of the "2015 Opportunity Agenda" is to help provide tax relief for middle and lower income families with respect to the burden of high property taxes.
- Creates a Real Property Tax Credit for families whose property taxes are more than six percent of their income.
- Taxpayers who have income below $250,000 would be eligible for the credit, which would result in a credit of up to 50 percent of the total property taxes that is more than six percent of their income. The amount of the credit is based on an income scale.
- Taxpayers with low income brackets and other taxpayers with the highest property taxes may benefit with the most relief under the agenda.
New York State has published the above proposal which be located at:
https://www.governor.ny.gov/news/2015-opportunity-agenda-restoring-economic-opportunity
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Guidance for School Districts and Local Government
Accounting for Retainage Percentages
Retainage is an amount of money withheld by a local government from progress payments submitted to a contractor until satisfactory completion of the work. It is also a form of security for proper completion of the work under a construction contract.
New York State General Municipal Law §106-b(1) states that local governments can retain no more than five percent of each progress payment if the contractor is required to submit a performance bond and a labor and material bond as stipulated in the contract. In all other cases, the local government may retain up to ten percent of each progress payment.
Previous guidance stated that claims for construction progress payments included a debit to expenditures for the amount of the claim, a credit to cash for the claim payment and a credit to H605 retained percentages, contracts payable for the amount withheld. Once the work is completed, or when contractors deposit securities instead of retainage, an entry can then be recorded to remove the retainage payable.
In October 2014, the Office of the State Comptroller issued guidance updating the accounting treatment which no longer requires utilizing the account code H605. This code will no longer be available in the Annual Update Document for the fiscal year end December 31, 2014 and the ST-3 Report for fiscal year ending June 30, 2015.
The Office of The State Comptroller references GASB Interpretation No. 6 which states that retainage is not a liability until it becomes due and payable. As a result, the only time this liability would be on the financial statements, is if the contractor is owed the retainage at year end since the payment has not been made. The Office of the State Comptroller (OSC) has published updated guidance on the accounting treatment effective October 2014 which can be located at:
https://osc.state.ny.us/localgov/pubs/releases/files/AccountingRetainages.pdf
Real Property Tax Freeze Certification
As part of the state fiscal year 2014-2015 budget, a local government will need to certify that they are "freeze compliant" with the new real property tax freeze. A local government will be considered "freeze compliant" when their adopted budget does not exceed the tax levy limit under the real property tax levy cap. A local government will need to repeal any laws or resolutions it has adopted for the purposes of overriding the tax levy limit. For school districts, the requirements are the same except they are not obliged to repeal any overrides of the tax levy.
Each year, the certifications are collected by the Office of the State Comptroller from taxing jurisdictions that are compliant with the real property tax freeze. The Office of the State Comptroller also collects proposed and adopted budget information from all local governments and school districts, whether or not they are in compliance with the real property tax freeze.
Certifications must be submitted by the 21st day of the new fiscal year. A listing of deadlines for local governments can be found at www.osc.state.ny.us/localgov/realprop/index.htm.
Stressed Municipalities and Multi-Year Financial Plans
In 2014, Governor Cuomo signed a new law, Chapter 526 of 2014. This law applies to counties, cities with populations of less than one million, towns and villages, who participate in multi-year planning through the use of a third party financial advisor, and have been noted by New York State as being financially stressed.
Chapter 526 of 2014 allows the municipalities mentioned above to be eligible for reimbursement from grants and loans provided by the Financial Restructuring Board for Local Governments (at their discretion) for all or part of the costs incurred for utilizing the third party financial advisor.
The new law became effective on December 17, 2014 and a chart of the municipalities eligible for the program can be found at www.frb.ny.gov.
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Health Care Reform Changes Effective
For 2015
The Patient Protection and Affordable Care Act is designed to ensure that all Americans have access to quality affordable health care, and is intended to create transformation within the health care system necessary to contain costs in the future. Below is a summary of considerations with regards to the Affordable Care Act.
Individuals and Families
- Open Enrollment for the Health Insurance Marketplace began in 2013. The enrollment period for 2015 is from November 15, 2014 through February 15, 2015. Eligible individuals and families can enroll or gather information at www.HealthCare.gov.
- As of January 1, 2013 the floor for deducting medical expenses as an itemized deduction increases to 10% of AGI if you and your spouse are under age 65 at the end of the year. If either you or your spouse is age 65 or older, expenses exceeding 7.5% of AGI may be taken, as under pre-2013 rules.
- In 2015 there will be a tax credit for the insurance premiums obtained through the Health Insurance Marketplace. This tax credit was designed to make health insurance more affordable. There will be income limitations on qualifying for the credit. The credit can be claimed in advance or with your filed tax return.
- Starting in 2014 and continuing in 2015, you and your family must have health care coverage or have an exemption for coverage. If one does not have either, a payment will be required to be made with the 2014 and 2015 tax returns.
Health Savings Account ("HSA")
- The annual contribution limit for HSA plans for 2015 is $3,350 for individuals and $6,650 for an individual with family coverage. These contributions are not subject to tax.
- HSA holders 55 and older, can save an additional $1,000 bringing the single amount to $4,350 and $7,650 for a family.
- High deductible health plans allow for an annual deductible that is no less than $1,300 for self-only coverage or $2,600 for family coverage. Annual out of pocket costs cannot exceed $6,450 for self-only coverage or $12,900 for family coverage.
Flexible Spending Arrangement ("FSA") - The annual contribution limit for an FSA is increasing in 2015 to $2,550, up $50 from 2014.
- FSA plans are permitted to allow for a maximum grace period of 2 months and 15 days following the end of the plan year for unused contributions to be used against expenses incurred in the subsequent plan year.
- Currently, employers may amend their plan documents (has to be amended by the last day of the plan year to be effective for that year) to allow participants to roll forward $500 of amounts not utilized to the subsequent year, if they want to offer this benefit. This rollover will not affect the $2,500 annual contribution limit described above.
- Please note that the Plan has to choose to provide for either the grace period mentioned above, or the rollover of up to $500.
Employers - Continuing in 2015, small employers with 50 or fewer employees became eligible in 2013 to purchase affordable insurance through the Small Business Health Options Program ("SHOP").
- Many employers are now required to report the value of provided health insurance on box 12 of the W-2 with a code of "DD". Employers filing fewer than 250 W-2s will be required to report the cost of provided health insurance once the transitional period ends. The Internal Revenue Service has stated that any expansion of the reporting rules or ending of the transitional relief will only apply for calendar years that start at least six months after the new rules are issued. See http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage for more information.
- Small business owners could be eligible for the Small Business Health Care Tax Credit if you cover at least 50 percent of your full-time employee's premium and you have less than 25 full time employees with average wages under $50,800 (for 2014) with a "qualifying arrangement". However, beginning in 2014, the credit is only available for two consecutive taxable years. Small
- A "qualifying arrangement", as defined by the Internal Revenue Service is where an eligible small employer pays premiums for each employee enrolled in health care coverage offered by the employer through the SHOP in an amount equal to a uniform percentage (not less than 50%) of the premium cost of the coverage.
- Employers that self-insure may be required to pay a fee to fund the Patient Centered Outcomes Research Fund, see http://www.irs.gov/uac/Patient-Centered-Outcomes-Research-Trust-Fund-Fee:-Questions-and-Answers for more information.
- Effective 2015, employers that provide health coverage to employees must file an annual return reporting certain information for each employee covered.
- For calendar year 2015, employers with 100 or more (this number is reduced to 50 for 2016) full time employees could be subject to a penalty fee if adequate affordable coverage is not offered to full time employees and one or more of these employees get a premium tax credit.
- To avoid paying fees in 2015, among other requirements, employers will be required to offer coverage to 70% of their full time employees and their dependent children. In 2016, employers must offer coverage to 95% of their full time employees and dependent children.
For more information, visit https://www.healthcare.gov. |
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R.S. Abrams & Co. is an accounting firm with extensive experience auditing school districts, boards of cooperative educational services, not-for-profits, and state & local governments. We also provide tax and accounting services to individuals, partnerships and corporations across the country. Our firm has been in business for over 75 years and provides auditing services in Nassau, Suffolk, Westchester, Rockland and Dutchess counties. | | |
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Disclaimer
The information contained in this newsletter is provided for informational purposes only, and should not be construed as legal advice on any subject matter. The Firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship. No recipients of information from this newsletter, clients or otherwise, should act or refrain from acting on the basis of any information included in this newsletter without seeking appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. The content of this newsletter contains general information and may not reflect current legal developments. The Firm disclaims all liability in respect to actions taken or not taken based on any or all of the contents of this newsletter. |
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Our firm has two locations in Islandia and White Plains, New York and the single most important factor in our firm's success over the past 75 years has been our uncompromising commitment to the highest standards of quality and professionalism. Should you have any questions for us, please don't hesitate to contact us at (631)-234-4444.
Sincerely, R.S. Abrams & Co., LLP |
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