California Minimum Essential Coverage Individual Mandate
We are sharing this information so you can be prepared to educate your clients on this new California requirement.
The California Legislature created the Minimum Essential Coverage Individual Mandate by enacting Senate Bill 78. The mandate took effect on January 1, 2020 and requires Californians to maintain minimum essential health coverage for each month on or after that date.

Californians who fail to have qualifying health coverage will owe a state penalty for each month they lack coverage. Californians who owe a penalty will pay when they file their tax year 2020 state income tax return in 2021. Note: this does not affect tax year 2019 returns.

To avoid this penalty, California residents need to have qualifying health insurance for themselves, their spouse, and their dependents beginning on January 1, 2020. Covered California, the state’s insurance marketplace, will provide financial assistance to some households that meet certain income requirements and will issue certificates of exemptions to individuals who are exempt from the mandate. For more details, visit the Franchise Tax Board’s webpage.

Californians must have health coverage: Californians must have health insurance beginning January 1, 2020. In general, a taxpayer who fails to secure health insurance will face a penalty when filing their 2020 tax return in 2021.

Exemptions available: Most exemptions from the mandate will be claimed when filing 2020 state income tax returns in early 2021. Additional exemptions will be granted through Covered California beginning in January 2020.

Financial assistance available: Covered California has financial assistance available for Californians to purchase health insurance.

To find out more about health insurance options and financial assistance, visit CoveredCA.com.
For information about the penalty for not having qualifying coverage, visit FTB.CA.GOV.

When it comes to a tax preparation checklist for 2019, what exactly needs to be on your to-do list? And how can you best streamline?

All the checklists are available here.

Make Sure Your Books Are Balanced

To make sure you file your taxes correctly and aren’t overpaying, your books need to be accurate and up to date. If you’re going the do-it-yourself route, look over your transactions and books.

Not properly categorizing your business transactions means that tax-deductible expenses might go overlooked. In turn, you might end up paying more in taxes. What’s more, having unorganized bookkeeping could mean more headache and time and money wasted when it’s time to file your taxes.

Beyond taxes, unbalanced books means you don’t have the data you need to make smart, informed decisions on how to run your business.

Give Your Accountant Access to Your Books

If you’re handling your books on your own, allow your accountant to have access to all your software after you close them, Consider Applied Bookkeeping & Tax Services . “This will eliminate a lot of back-and-forth questioning that will arise if you simply send him an Excel sheet of your annual profit and loss, statement balance sheet and trial balance.”

Signs of a good accountant includes making sure they report everything correctly on your tax return. Oftentimes this means digging into the details and the supporting documents found in your bookkeeping software.

Have Proof of Your Estimated Tax Payments

Take screenshots of payment confirmations for all estimated tax payments made during the year and send them to your accountant, along with your other tax documents.

Prepare 1099 Forms for Contractors

If you hired independent contractors in the past year, you’ll want to get your 1099 forms prepared. Per the IRS, if you’ve paid a freelancer at least $600 in 2019, you’ll need to file a 1099 for each person. Forms need to go to both the IRS and to your independent contractors. The deadline to submit these 1099 forms by January 31, 2020.

Organize Those Receipts

The ideal scenario is that you have all your receipts from business-related expenses stacked neatly in a safety box. The actual scenario? You most likely have piles of receipts scattered in random places — wedged in your car, at the bottom of your laptop bag or in a messy drawer.

While your accountant can most likely pull from your credit card or bank transactions, you’ll want to keep those receipts organized and handy. Besides providing proof of purchase, you might need them in the rare case that your business is subject to an audit.

Notify Vendors and Clients If You’ve Moved

If you’ve changed addresses in the last year, make sure you’ve notified all your clients of this change before the end of the year. Otherwise, you might get tax documents (i.e., 1099s) sent to the wrong address. You can also check your earnings from what’s called a Wage and Income Transcript. The transcript shows all the information the IRS gets from both your 1099 and W-9 forms.

Have Your Accountant Take a Look at Your Payroll

If your business has W-2 employees and you are handling payroll through a payroll platform, it might be a good idea to have your accountant take a second look, recommends Allec. “One common mistake is S Corporation employees who own 2% or more of the S Corporation not reporting on their W-2 health insurance premiums paid by the S Corporation on their behalf.”

There might be other mistakes you’ve made as well, and an accountant can help sort it out.

Set Aside Time to Get It Done 

Dedicate a block of time to focus on getting your tax prep in order. Otherwise, you might find yourself with more loose ends to tie.