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Important deadline looming for time-sensitive tax breaks and filing deferrals

Apr. 30, 2015, is an important deadline for some businesses, individuals, and retirement plans. As this article explains, it’s the date by which eligible employers must submit certification requests to retroactively qualify for the Work Opportunity Tax Credit (WOTC) for 2014. It’s also the last day of a special enrollment period for certain taxpayers paying a fee for not having minimum essential health coverage, and the end of an extended period for submitting pre-approved 403(b) plans.

Employers must submit certification request by Apr. 30, 2015, to claim retroactive work opportunity tax credit. The WOTC under Code Sec. 51 allows employers who hire members of certain targeted groups (such as qualifying veterans) to get a credit against income tax equal to a percentage of first-year wages (and second-year wages as well, for some eligible hires). The credit depends on which targeted group the eligible hire belongs in. Targeted groups include: qualified IV-A recipients (qualified recipients of aid to families with dependent children or successor program); qualified veterans; qualified ex-felons; designated community residents; vocational rehabilitation referrals; qualified summer youth employees; qualified supplemental nutrition assistance benefits recipients; qualified SSI recipients; and long-term family assistance recipients, i.e., members of a family that receives or received assistance under a IV-A program for a minimum period of time. (Code Sec. 51(d))

An individual isn’t treated as a member of a targeted group unless: (1) on or before the day the individual begins work, the employer obtains certification from the designated local agency (DLA; a State employment security agency) that the individual is a member of a targeted group (Code Sec. 51(d)(13)(A)(i)); or (2) the employer completes a pre-screening notice (Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit) on or before the day the individual is offered employment and submits such notice to the DLA to request certification not later than 28 days after the individual begins work. (Code Sec. 51(d)(13)(A)(ii))

The WOTC was to have expired for eligible employees who began work after 2013, but the Tax Increase Prevention Act of 2014 (TIPA), enacted late last year, extended the WOTC retroactively for 2014 for members of targeted groups.

Because TIPA extended the WOTC retroactively for 2014 for members of targeted groups, IRS recognized that employers need additional time to comply with the requirements of Code Sec. 51(d)(13)(A). Accordingly, Notice 2015-13, 2015-10 IRB , provided that a taxable employer that hired a member of a targeted group, or a qualified tax-exempt organization that hired a qualified veteran described in Code Sec. 51(d)(3), on or after Jan. 1, 2014 and before Jan. 1, 2015, will be considered to have satisfied the requirements of Code Sec. 51(d)(13)(A)(ii) if it submits the completed Form 8850 to request certification to the appropriate DLA not later than Apr. 30, 2015.

References: For the WOTC, see FTC 2d/FIN ¶  L-17775; United States Tax Reporter ¶  514; TaxDesk ¶  380,700; TG ¶  14976.

Special enrollment period ends on Apr. 30, 2015, for taxpayers paying fee for not having health coverage. Under Code Sec. 5000A, which was added by the Affordable Care Act (ACA), beginning in 2014, if a taxpayer, or an individual for whom the taxpayer is liable, isn’t covered under minimum essential health insurance coverage for one or more months, then, unless an exemption applies, the taxpayer is liable for the individual shared responsibility payment on his return. Married individuals who file a joint return for a tax year are jointly liable. The amount of a taxpayer’s shared responsibility payment is based, in part, on the number of individuals a taxpayer is responsible for who do not have minimum essential coverage. (Code Sec. 5000A(c)(3)(B), Reg. § 1.5000A-4)

The individual shared responsibility payment applied for the first time when 2015 returns were filed.

A special enrollment period that began on Mar. 15, 2015, and will end at 11:59 PM E.S.T. on Apr. 30, 2015, allows those individuals and families who were unaware of, or didn’t understand the implications of, the new requirement to carry minimum essential health insurance coverage, to enroll in 2015 health insurance coverage through a Federally-facilitated Marketplace (FFM). If taxpayers do not purchase coverage for 2015 during this special enrollment period, they may have to pay a fee when they file their 2015 income taxes.

Taxpayers taking advantage of this special enrollment period will still owe a fee for the months they were uninsured and did not receive an exemption in 2014 and 2015. The special enrollment period is only designed to give such individuals the opportunity to get covered for the remainder of the year and avoid additional fees for 2015.

Individuals eligible for the special enrollment period must:

…live in a state with an FFM;
…currently not be enrolled in coverage through the FFM for 2015;
…attest that, when they filed their 2014 tax return, they paid the penalty for not having health coverage in 2014; and
…attest that they first became aware of, or understood the implications of, the shared responsibility payment after the end of open enrollment (Feb. 15, 2015) in connection with preparing their 2014 taxes.

References: For the requirement to maintain minimum essential coverage, see FTC 2d/FIN ¶  A-6401  et seq.; United States Tax Reporter ¶  50,00A4  et seq.; TaxDesk ¶  576,151  et seq.; TG ¶  1811  et seq. For the amount of penalty for failure to maintain health insurance coverage, see FTC 2d/FIN ¶  V-3900  et seq.; United States Tax Reporter ¶  50,00A4.2; TaxDesk ¶  867,302; TG ¶  71656.

Extended deadline to file pre-approved 403(b) plans ends Apr. 30, 2015. Employees of tax-exempt educational, charitable, religious, etc. organizations or public schools get special tax advantages from annuities bought for them by their exempt employers. The tax-sheltered annuities offer benefits similar to those under a qualified employee plan. Tax isn’t imposed when the annuity is bought; rather, it is deferred until payments are received. (Code Sec. 403(b), Reg. § 1.403(b)-1 )

Rev Proc 2013-22, 2013-18 IRB 985, established a new program for the submission of Code Sec. 403(b) pre-approved plans to IRS, modeled after the program for pre-approved Code Sec. 401(a) qualified plans, which is described in Rev Proc 2011-49, 2011-49 IRB 608.

Rev Proc 2014-28, 2014-16 IRB 944, modified procedures in Rev Proc 2013-22, for issuing opinion and advisory letters for Code Sec. 403(b) pre-approved plans (i.e., Code Sec. 403(b) prototype plans and Code Sec. 403(b) volume submitter plans). Among the modifications was an extension of the deadline to submit Code Sec. 403(b) pre-approved plans to IRS for opinion and advisory letters, from Apr. 30, 2014, to Apr. 30, 2015.

References: For Code Sec. 403(b) plans, see FTC 2d/FIN ¶  H-12450  et seq.; United States Tax Reporter ¶  4034.04; TaxDesk ¶  135,506; TG ¶  9026.

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