Tags: IRS | inflation | tax | Congress

IRS' Annual Inflation Adjustment Impacts Over 40 Tax Provisions

Tuesday, 05 November 2013 12:24 PM Current | Bio | Archive

The IRS has announced the annual inflation adjustment for 2014. This proves two things. First, there is inflation in the economy, and second, inflation impacts the taxes you pay.

One tax provision of current interest is the credit allowed for a small employer's contribution for employees' health insurance. This credit is phased out when the employer has more than 10 employees and the average annual wages paid exceed $25,400.

The annual limit on employee contribution to an employer-sponsored flexible health saving arrangements remains at a measly $2,500.

I took notice of these as they highlight that Obamacare has an extraordinary amount of complexities that makes the ability to implement the Affordable Care Act ever more questionable.

The earned income tax credit goes up to $6,143 for a married couple filing jointly with three children. While seemingly not very much money, it is effectively just a cash welfare payment.

The Government Accountability Office has issued reports stating that the IRS has not been able to stop the fraud in this program.

This is troublesome since the income verification and other matters that are necessary for a legitimate allowance of the earned income tax credit is just about the same for verifying the income requirements for the healthcare premium subsidies to be given by the IRS for Obamacare.

One provision that reminds taxpayers that congress responds to its special voting constituencies is the Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Employees under Accountable Plans. For calendar year 2014, an eligible employer may pay certain welders and heavy equipment mechanics an amount of up to $17 per hour for rig-related expenses that is deemed substantiated under an accountable plan if paid in accordance with IRS revenue procedures. If the employer provides fuel or otherwise reimburses fuel expenses, up to $10 per hour is deemed substantiated.

We can expect intense negotiations between the Democrats and Republicans and the president in the upcoming budget and tax reform debates involving such meaningful issues like how much welders are paid for working on a pipeline.

The loan limit on agricultural bonds for first-time farmers is $509,600. I guess it is important to encourage college graduates who can't get a job to become farmers.

The personal exemption is now $3,950, which is phased-out if a taxpayer makes too much money. Essentially, it is a clever way for Congress to charge more taxes while being able to say with a straight face that they are not raising tax rates.

Lest taxpayers forget the prior efforts of Congress to make healthcare more affordable, "high-deductible" medical savings accounts are also subject to inflation adjustments.

For self-only coverage, for example, a high-deductible health plan is defined as a plan that has an annual deductible that is not less than $2,200 and not more than $3,250, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,350.

It seems that Congress is going to have to rethink this one because a deductible of only $2,200 is rapidly becoming just a distant memory.

This annual adjustment for inflation of so many tax provisions should remind all taxpayers of what the Congress and the president are really doing to the U.S. taxpayers. And maybe the taxpayers ought to remind congress and the president as well.

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The IRS has announced the annual inflation adjustment for 2014. This proves two things. First, there is inflation in the economy, and second, inflation impacts the taxes you pay.
Tuesday, 05 November 2013 12:24 PM
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