How does the recient Supreme Court ruling on health care law affect me?

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On June 28, the Supreme Court ruled that the “Patient Protection and Affordable Care Act of 2010” was constitutional, including the provision in the law requiring individuals to have health insurance coverage starting in 2014.

Several provisions in the health care law had already gone into effect, and many new tax provisions are scheduled to take effect in 2013. These are the provisions you should factor into your tax planning for the rest of this year. A quick review of these tax provisions:

* Annual contributions to health flexible spending accounts (FSAs) will be limited to $2,500.

* The 7.5% income threshold for deducting unreimbursed medical expenses increases to 10% for those under age 65. Those 65 and older may continue to take an itemized deduction for medical expenses exceeding 7.5% of adjusted gross income through the year 2016.

* The payroll Medicare tax will increase from 1.45% of wages to 2.35% on amounts above $200,000 earned by individuals and above $250,000 earned by married couples filing joint returns.

* A new 3.8% Medicare tax will be imposed on unearned income for single taxpayers with income over $200,000 and married couples with income over $250,000.

Contact our office for tax planning guidance following this landmark Supreme Court decision.

How to get slow-paying customers to pay up

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You’ve done your part. The job is complete, your customer is satisfied — but a month has gone by, and your invoice is still outstanding. You’d like to work with the customer in the future. So how do you get your money without losing the customer?

Here are two strategies that may help.

1. Communicate promptly. On the day after the due date, send an e-mail with your original invoice attached, or fax a copy. Then call to make sure the duplicate was received. While you’re talking, ask whether the customer has all necessary documentation, and find out why payment is delayed. If the customer is happy with your performance, mention that you won’t be able to complete new contracts until past invoices are cleared up. Request payment on a specific date.

What if that date arrives but the money doesn’t? Drop by your customer’s business. Take a copy of the invoice and notes of previous conversations. Offer to wait while a check is processed.

2. Be willing to negotiate. When customers fall on hard times, you may still be able to find a solution that will work for both of you. Some options:

* Ask for a portion of the outstanding balance.

* Request that a specific invoice be paid immediately, with the remainder due at staggered intervals.

* Establish a short-term payment schedule for a series of smaller checks.

* Offer to convert the receivable into a formal note, with an amortization schedule and interest rate.

Setting credit terms, limiting the amount of credit you’ll extend, checking ratings, and requiring down payments can prevent collection difficulties. If you’d like help establishing procedures for receivables management in your business, give us a call.

Can you qualify for the home office deduction?

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The home office deduction is available when you use part of your home regularly and exclusively as your primary place of business, or for meeting clients.

If you’re an employee who works from home, there’s an additional rule: The exclusive use must be for the convenience of your employer.

In either case, “exclusive” is defined as “all or nothing.” Conduct any personal activities in the space you’ve designated as your office and the deduction is lost.

But satisfy the requirements and you can write off part of the expenses of running your home, including utilities, interest, and property taxes, as a business deduction. That means those costs can directly reduce business income, saving you income tax. If you’re a sole proprietor, the deduction may also reduce self-employment tax. Though the amount you can claim is generally limited to business income, disallowed expenses can be carried forward to future years.

What are the drawbacks? One drawback to taking a home office deduction is the potential for depreciation “recapture” that may apply when you sell your home, potentially reducing the amount of gain you can exclude from income.

Give us a call. We can answer your questions about the tax requirements of a home office deduction in your particular situation.