New Jersey

How Much is the NJ Health Insurance Penalty?

Although there are no longer Obamacare penalties at the Federal level starting 2019, the State of New Jersey has implemented its own penalties for 2019. What are some of the requirements, exemptions, and penalties regarding this new law?

Requirements: The law requires you to have minimum essential health coverage or qualify for an exemption of coverage. If you do not have coverage or qualify for an exemption, then you will incur a shared responsibility payment when you file your 2019 New Jersey tax return next year.

Exemptions: There is a list of over 20 exemptions, and some of them are as follows: income related, such as marketplace affordability and income below filing thresholds, gaps in coverage of less than two consecutive months, hardships, and group memberships, such as being a part of a health care sharing ministry.

Penalties: The minimum penalty is the greater of 2.5% of your household income or $695 for an individual taxpayer. This increases to a maximum of $15,060 for a family of two adults and three dependents with a household income greater than $400,001.

The penalties are steep so make sure that you are properly covered or are able to receive an exemption to the penalties. For those who are looking for non-traditional coverage options, health care sharing ministries such as Solidarity HealthShare or Christian Healthcare Ministries may prove to be good, low-cost options. However, make sure to perform your due diligence to make sure that these can be the right fit for you.

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Did You Know that NJ Now Requires All Residents to Have Health Insurance?

Starting this year, New Jersey is requiring all residents to have health insurance. Even though the Federal government has gone in the opposite direction, there are a handful of states that have their own mandates or are considering a mandate. What are some of the requirements, exceptions, and penalties regarding this new law?

Requirements: The law requires you to have minimum essential health coverage or qualify for an exemption of coverage. If you do not have coverage or qualify for an exemption, then you will incur a shared responsibility payment when you file your 2019 New Jersey tax return next year.

Exceptions: There is a whole list of exemptions, and some of them are as follows: income related, such as marketplace affordability and income below filing thresholds, gaps in coverage of less than two consecutive months, hardships, and group memberships, such as being a part of a health care sharing ministry.

Penalties: The minimum penalty is the greater of 2.5% of your household income or $695 for an individual taxpayer. This increases to a maximum of $15,060 for a family of two adults and three dependents with a household income greater than $400,001.

The penalties are steep so make sure that you are properly covered or are able to receive an exception to the penalties. For those who are looking for non-traditional coverage options, health care sharing ministries such as Solidarity HealthShare or Christian Healthcare Ministries may prove to be good, low-cost options. However, make sure to perform your due diligence to make sure that these can be the right fit for you.

If you like what you just read then don’t hesitate to forward/share with your friends.

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Before You Buy a Business

Businesses are bought and sold each day and some make better investments than others. Before you buy a business, here are a few things to make sure you make the right move:

Why is the seller selling? There can be many reasons why a business is for sale, and some reasons are better than others. For example, if the business owner is retiring, that is a good reason, but if the owner is selling because they are not making much of a profit, then that is a negative sign.

Do you know the industry? If you worked for years as a general manager of a restaurant, then this would provide you with a good base of knowledge of how to run a restaurant. The same goes for any other industry.

Due diligence: You should not just take the seller’s word that the business is making a certain amount of money, as the seller should be able to substantiate it with information, such as bank statements and tax returns.

Seek the advice of a professional: Seeking legal, business, and tax advice can pay for itself over and over again. A good attorney will help to work out the legal agreements, while a CPA will help to advise on how to maximize the tax effectiveness of buying the business. I have seen business purchases after-the-fact whereas the new owner loses tens of thousands of dollars of deductions because it was not structured correctly. The agreements can be made so that both parties receive the benefits they are looking for.

Should You Buy a Home or Rent?

Several years back when the real estate market was red hot, it was almost a no-brainer to buy a home. A year or two later your home appreciated by thousands of dollars and was worth much more than you paid for it. We all know that this is not true now, so does it make sense to be a homeowner or a renter?

Let’s start with the benefits of owning a home. First, home prices are much more affordable than in the past. Combine this with historically low interest rates, and it makes home ownership much more enticing. Over time real estate does generally appreciate and over time it usually becomes one of the largest assets a person owns, especially for the middle class. Also, the interest paid on your mortgage and property taxes paid are generally tax deductible.

The drawbacks of owning a home are several. First, you must be able to afford and qualify for a mortgage. The combined mortgage and property tax payments are usually much higher than renting. Although, over time theoretically your rent will increase while your mortgage payment stays constant with hopefully only a small increase of property taxes. Also, you are responsible for all of the upkeep, improvements and repairs, utilities and all other expenses.

Renting can be beneficial for a variety of reasons. First, the payments are usually lower than a mortgage and property taxes. You do not need a large down payment, except for a security deposit. It is easier to move because you do not have to worry about selling a home and can take a job much farther than where you currently live. You also may be able to save more money because your housing costs are lower.

Renting can present a problem in the long-term though because it may prove to be more expensive over time. You also do not build any equity or have the benefit of real estate appreciation. Also, when you rent you obviously are more restricted by the rules of your landlord.

Many factors should be weighed before purchasing a home or choosing to continue renting. Home ownership is the American dream, but one thing to keep in mind is that you want to make sure that your monthly payments do not cause a financial strain. This even applies to existing homeowners.

My Customer/Tenant Didn’t Pay Me. Can I Deduct This on My Tax Return?

I get asked this question a lot, mostly from business owners. The answer to this question is that it depends. First a quick accounting lesson of cash vs. accrual. I promise not to keep it too technical!

If you are a cash basis taxpayer, then you record income or sales once you get paid, either by cash, check, or credit card. You also record expenses when you pay them, even if with a credit card.

For an accrual basis taxpayer, you record income when it is earned. For example, if you are a consultant and you sent an invoice to your client in January for December’s work, then you record the income from the invoice during December. The same goes for expenses, as it generally doesn’t matter when you paid your bill, but when you incurred the expense. This means that if you ordered supplies in December, but paid for them in January, you can deduct the expense in December.

Now to answer the original question: A cash basis taxpayer cannot deduct as an expense an outstanding invoice that was not paid by their customer, or tenant, if they are a landlord. Remember, the invoice was not included as income. On the other hand, an accrual basis taxpayer can deduct an expense for non-payment from a customer or tenant, as long as it is deemed uncollectible.

Most small business clients and landlords are on the cash basis method of accounting. It is much easier for record keeping purposes, and especially for income tax purposes.

NJ Homestead Benefit

New Jersey Governor Chris Christie has extended the deadline for filing Homestead Benefit applications to Friday, December 14.

Time Management Tip for September 6, 2012

There are numerous books on time management, and I have read several of them. Some ideas are great and can be implemented right away. Here is one idea to get time under control:

Focus on the tasks that are most important first. It may sound overly simply, and it is, but it’s just not that easy. We are so distracted by all of the things that need our attention throughout the day, that it is easy to lose focus on what really counts. One way of doing what is important is to start on it first thing in the morning without letting any interruptions distract you. This way, you know that you will have accomplished what is important.