Lowrance Law, LLC

irs_logo_5      Our friends, the IRS,  modified the “use-or-lose” rule for health flexible spending arrangements (health FSAs) so that at the plan sponsor’s option, participating employees may carry over up to $500 of unused amounts remaining at year-end. Previously, any amounts that weren’t used by year-end would be forfeited. Certain plan sponsors may be eligible to take advantage of this option as early as plan year 2013.

Health Flexible Spending Accounts

Health FSAs are benefit plans that many employers provide to employees to reimburse employees for health care expenses. The great deal for employees is that qualifying contributions to and withdrawals from FSAs are tax-exempt. Contributions to these FSAs are tax exempt–no tax paid.

Unused FSA contributions left over at the end of a plan year have historically been forfeited to the employer under the so-called “use-it-or-lose-it rule.” With the new changes if you have money left at the end of the year, you can now carryover $500 to the next year and use it in addition to the maximum contributions allowed by your employer’s plan. See all the boring “technical details” right here IRS Notice.

Annual Tax Inflation Adjustments

For tax year 2014, the Internal Revenue Service announced  annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes.

The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts.

  • The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
  • The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.
  • The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).
  • The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly).

See all the boring details: Here

All this wonderful information brought to you by Lowrance Law LLC, an experienced tax controversy/resolution law firm.

Call us to assist you with IRS and State tax issues. We help resolve your problems. Call 703 506 1600.

Bill Lowrance

No legal advice or client relationship here!


Yesterday I attended the live broadcast of a legal education program put on by the American Bar Association discussing the IRS Employment Tax National Research Project. As part of this project, the IRS intends to audit 6,000 businesses, both small and large, per year between 2010 and 2013. Part of what the IRS will be examining in these audits is the classification of employees; namely, whether they are classified as employees or independent contractors. If the IRS determines that a business is misclassifying an employee, tax liabilities and penalties can be severe.

To avoid controversy, an employer must take the steps to determine whether their workers fall into the category of an independent contractor or an employee. This process is often very complex and involves analysis of work procedures and corporate organization, along with examination of banking records and other criteria. While such a distinction is often case-specific, the general guideline is that a worker is considered an employee if the employer has the right to control the worker regarding what job is performed and how it is performed. Whether this right is exercised is irrelevant.

If you operate under the assumption that you are working with independent contractors rather than employees, and therefore do not have to withhold federal income and payroll taxes, it is important to remember to send a Form 1099 for the contractor to file. If the IRS does audit your business and determines that you are working with employees rather than independent contractors, filing Form 1099s could mean your company is entitled to the statutory safe harbor provided by section 530 of the Revenue Act of 1978.

Now that the IRS is enacting its Employment Tax National Research Project, it is more important than ever to make sure your company is up to date with the filing status of its workers. Failure to remain up to date with stricter IRS policy could result in tax liabilities.

If you are notified of an IRS audit or you want to discuss your employment practices, please don’t hesitate to contact me for further information:

Bill Lowrance, (703) 506-1600, lowrancelaw@gmail.com


Spouse Not Report Income — Innocent Spouse Relief

June 28, 2010

See updated post at first page of Blog. There are of course benefits to filing a joint tax return with your spouse: eligibility for tax deductions and lower tax rates come to mind. However, there can be severe repercussions that come from filing jointly, and those occur when items are improperly reported on or when […]

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Still Time To Report UBS — Foreign Bank Accounts

June 20, 2010

There are many reports in the news media about the latest Swiss efforts to turn over formeraly “secret” Swiss UBS bank account to the IRS. The Boston Globe: “Swiss lawmakers yesterday ended a standoff and approved the bank’s settlement with the United States, clearing the way for the names to be transmitted to tax authorities […]

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New Posts Coming

March 8, 2009

Now that tax season is here, I want to get back to writing more interesting tax facts, articles and information.  My law practice is busy and taking my time t away from the luxury of writing for this blog. International and domestic tax enforcement will be very active in the future.  I will write about this soon […]

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IRS and Offshore Accounts–The Heat Is On

January 11, 2009

According to the NYT, the Swiss Bank UBS, the world’s largest wealth manager, is going to return about $18 billion dollars to more than 19,000 account holders most of whom are US citizens.   The US citizens holding the accounts, according to the IRS and Justice Department, have evaded at least $300 million a year in […]

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TIGTA Audits IRS 2008 Report To Congress

January 6, 2009

The Treasury Inspector General for Tax Administration (TIGTA) is the only government entity that conducts internal audits the IRS.  Well, now you can read the most recent interesting report that covers their audit April 1, 2008 through September 30, 2008.  The report is TIGTA’s semiannual report to Congress. There are some “blockbuster” (technical tax term) statements and […]

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US Tax Investigations–Foreign Bank Accounts and Tax Havens

December 4, 2008

Thanks to Tax Prof Blog for A NYT Story on the expanded US Justice Department and IRS investigation of foreign banks, Credit-Suisse and HSBC and their private banking services.  The new investigation relates to the present investigation into UBS Bank in Switzerland See See Prior Post.  The IRS and US Department of Justice (DOJ) are really looking for […]

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