Affordable Care Act
Revised: 6/1/2010
The provisions of the Affordable Care Act do not apply for Wisconsin income tax purposes unless they are adopted by the Wisconsin Legislature. The Legislature is currently adjourned. It is anticipated that the Legislature will consider whether or not to adopt these provisions in the next session which will begin in January of 2011.
Until the provisions of the Affordable Care Act are adopted, Wisconsin must follow federal law in effect prior to the Affordable Care Act. Therefore, to qualify for the exclusion from gross income for employer-provided accident or health insurance benefits including coverage in a medical flexible spending account (FSA), for Wisconsin purposes the child under age 27 must qualify as a dependent for income tax purposes (either as a "qualifying child" or "qualifying relative"). For purposes of health insurance coverage only, an adult child may meet the definition of a "qualifying relative" even though the adult child's gross income may equal or exceed the exemption amount.
If the adult child does not qualify as a dependent, the fair market value of the adult child's health insurance coverage and reimbursements from a medical flexible spending account (FSA) are income and taxable wages to the employee.
New HIRE Act credit available
Publication date: 04/02/2010
President Obama signed the act into law March 18, creating tax breaks for businesses hiring new workers. Employers can receive an exemption from Social Security payroll taxes for every worker hired after Feb. 3, 2010, and before Jan. 1, 2011, if that worker has been unemployed for at least 60 days. Those with qualifying employees can take a reduction in taxes for wages paid to those workers from March 19, 2010, through Dec. 31, 2010, that is equivalent to the employer share of the 6.2 percent Old Age, Survivors, and Disability Insurance (OASDI) portion of the Federal Insurance Contribution Act (FICA) taxes.
The law also allows an additional income tax credit, up to $1,000, that is equal to 6.2 percent of paid wages for every new employee retained for 52 weeks.
Federal Roth IRA Conversion Law Adopted for Wisconsin
On March 15, 2010, Governor Doyle signed 2009 Act 161. The pension and IRA contribution limits that will apply for the federal tax purpose for 2011 will also apply to Wisconsin.
All taxpayers may convert a traditional IRA to a Roth IRA, even in those cases where the taxpayer’s adjusted gross income exceeds $100,000. No penalties will apply on the conversion.
Taxpayers who make the conversion in 2010 may postpone payment of tax on the converted amount until they file their 2011 and 2012 income tax returns or they may elect to report the entire taxable amount on their 2010 returns.
The pension and IRA contribution limits that will apply for federal tax purposes for 2011 will also apply for Wisconsin.
In addition, this Act also adopts certain provisions of the federal Heroes Earnings Assistance and Relief Tax Act of 2008. Among the provisions adopted are:
- The treatment of qualified reservist retirement plan distributions.
- Military death benefits may be contributed to Roth IRA or Coverdell ESA.
- State or local bonuses for combat veterans are not taxable income.
- Differential pay treated as wages for purposes of employer benefits.
Taxpayers who filed a 2008 or 2009 Wisconsin income tax return and adjusted for the difference between the Wisconsin and federal treatment of any of these items, may now file an amended Wisconsin income tax return (Form 1X) to reverse the adjustment. Taxpayers who have not as yet filed their 2009 Wisconsin income tax returns may ignore the Schedule I adjustment for these four items.
New Mileage rates for 2010
Beginning on Jan. 1, 2010, the standard mileage rates for the use of cars, vans, pickups or panel trucks will be
