California Minimum Essential Coverage Individual Mandate

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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.
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California Assembly Bill 5 (AB5)

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‘ABC Test’ for Independent Contractors Set to Take Effect in California Jan. 01, 2020.

As 2019 draws to a close, every business with a California presence should consider evaluating its workforce in the Golden State to ensure compliance with AB 5, which will be effective Jan. 1, 2020. 

Through AB 5, the California legislature codified and expanded the reach of the so-called “ABC Test” for determining whether a worker should be classified as an independent contractor. This new law expands the reach of the California Supreme Court’s Dynamex decision which applied to coverage under the California Industrial Welfare Commission’s Wage Orders. AB 5 applies this new test to businesses under the California Labor Code and the California Unemployment Insurance Code. 

Currently, California businesses are subject to a variety of tests of employee status, depending upon the law in question. Under most federal and California laws, the common law agency test applies. For workers’ compensation laws, the California Supreme Court adopted an “economic realities” test 30 years ago in S.G. Borello & Sons v. Department of Industrial Relations.

However, as of Jan. 1, 2020, the default standard for independent contractor treatment will be the ABC Test.
The ABC Test significantly narrows the scope of work for which businesses may classify workers as independent contractors, rather than employees, and expands the application of this new standard to nearly all employers doing business in California. 
Businesses that do not adapt to the ABC Test may face an increased risk of claims from workers asserting that they were misclassified as independent contractors, on an individual and class or collective basis.

ABC Test Explained
Under the ABC Test, a worker is assumed to be an employee unless the business demonstrates:
A. That the worker is free from the control and direction of the hiring entity in performing the work, both in the contract for performance and in fact.

B. That the worker performs work that is outside of the usual course of the hiring entity’s business

C. That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

It is Prong B of the test that will likely cause the most difficulty for companies that regularly engage independent contractors. 

Prong B excludes from the assumption of employee status workers who perform duties outside the “usual course of the hiring entity’s business.” While AB 5 does not specifically define the phrase, many businesses use contractors to help them perform their regular business. California courts are expected to be tasked with interpreting the scope of this requirement. 

Many industries lobbied hard to obtain exemptions from the ABC Test. The new statute excludes seven different categories of occupations or business, each with its own separate test for qualifying for the exclusion. These exclusions cover diverse occupations ranging from professionals such as architects and lawyers to non-professionals such as grant writers, tutors, truck drivers, and manicurists. Each category has a slightly different requirement to qualify for the exclusion from the ABC Test. However, qualifying for the exclusion from the ABC Test merely defaults the workers to a determination under the Borello test. Complicating matters further is that for all these occupations, a determination of employee status under federal law, such as under the National Labor Relations Act, likely remains under the common law agency test.

Application and Enforcement
While the California Labor Commissioner is officially tasked with enforcing many of the provisions of AB 5, claims of worker misclassification will more commonly be asserted in private civil actions either individually or on a class basis. In other words, companies will increasingly see independent contractors bring claims for wage and hour law lawsuits or class actions (i.e. overtime claims, meal and rest break claims, wage statement claims, etc.).

Employer Takeaways
Although several industry groups are expected to challenge the new law, businesses operating in California should review and update their practices relative to independent contractors before Jan. 1, 2020 – whether through potentially reclassifying independent contractors as employees or revising independent contractor agreements. 
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2019 Tax Filing Due Dates

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The Tax Cuts and Jobs Act, passed late December 2017 brought many changes to the tax code, however it did not change the statutory due dates for filing taxes.

Whenever a regular tax filing date falls on a Saturday, Sunday, or a legal observed holiday in the District of Columbia, the due date for returns is pushed to the next business day.  In 2019, only a few dates will be adjusted because of this rule.

For calendar year tax returns reporting 2018 information that are due in 2019, the following due dates will apply.

Form 2019 Tax Filing Due Dates (Tax Year 2018)
Form W-2 & certain 1099-Misc (electronic or mail) January 31st
Form 1065 – Partnerships March 15th
Form 1120-S – S Corporations March 15th
Form 1040 – Individuals April 15th
FinCEN 114 – FBAR (will be allowed to extend) April 15th
Form 1041 – Trusts and Estates April 15th
Form 1120 – C Corporations April 15th
Form 990 Series – Tax Exempt Organizations May 15th
Form 5500 Series – Employee Benefit Plan July 31st
  Form   Extended Due Dates
Form 1065 Extended Return September 15th (9/16 for 2019)
Form 1120-S Extended Return September 15th (9/16 for 2019)
Form 1041 Extended Return September 30th
Form 1120 Extended Return October 15th
Form 1040 Extended Return October 15th
FinCEN 114 (Extended with Form 1040) October 15th
Form 5500 Series Extended Return October 15th
Form 990 Series Extended Return November 15th

For fiscal year filers:

  • Partnership and S Corporation tax returns will be due the 15th day of the third month after the end of their fiscal tax year.
  • C Corporation tax returns will be due the 15th day of the fourth month after the end of their fiscal tax year. A special rule to defer the due date change for C Corporations with fiscal years that end on June 30th defers the change until December 31, 2025 – a full ten years.
  • Employee Benefit Plan tax returns are due the last day of the seventh month after the plan year ends.

It is important to check when tax returns are due for all states in which taxpayers operate, because individual states may not conform to the Federal filing dates.

If you have any questions about these new due dates and the impact on your tax filings, please contact Applied Bookkeeping & Tax Services.

information contained herein is designed solely to provide guidance to the user, and is not intended to be a substitute for the user seeking personalized professional advice based on specific factual situations. 

Source: https://www.tgccpa.com/2018/11/2019-tax-filing-due-dates/

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We don’t miss a chance to impress our clients – here’s a proof! 

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We don’t miss a chance to impress our clients – here’s a proof!
Applied Accounting & tax Services Received Yet Another 5-Star Review!

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