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Personal FinanceWe are dedicated to keeping clients abreast of the latest developments and tax-saving strategies. This section includes a library of hundreds of timely articles about business, taxes, finances, trends and the like. The articles are categorized by subject matter, which can be accessed from the links. Click on your topic of interest and find a wealth of information.
The health care legislation, the Affordable Care Act (aka Obamacare), signed into law in 2010 affects virtually every individual in one way or another and significantly impacts the preparation of tax returns. The provisions take effect over a period of years and are categorized in this article by the year they became or will become effective. Some of the provisions include additional taxes to offset the cost of the health care benefits included in the legislation for lower-income individuals.
- Student Loan Forgiveness for Health Professionals
- Previously, an individual’s gross income didn’t include cancellation of debt income that was attributable to the discharge of all or part of any student loan if the discharge was made under a provision of the loan - that all or part of the indebtedness would be discharged if the individual worked for a certain period of time in certain professions for any of a broad class of employers.
- Tanning Services Excise Tax
- For indoor tanning services, a 10% excise tax is imposed on the amount paid for any indoor tanning service, whether paid for by insurance or otherwise. The tax is imposed on tanning service recipients, although the service provider is liable for the collection and payment of the tax; thus, service providers are liable if they fail to collect the tax.
- Employer Tax-Free Medical Benefits Available to Children under Age 27
- Health coverage provided for an employee's children under 27 years of age is generally tax-free to the employee.
- Big Break for Self-Employed Health Insurance Deduction
- Background - A self-employed individual (or a partner or a more-than-2%-shareholder of an S corporation) can deduct as an above-the-line expense 100% of the amount paid during the tax year for medical insurance on behalf of himself, his spouse, his dependents and his children under the age of 27 even if the children don’t qualify as tax dependents, subject to the following requirements (Code Sec. 162(l)(1)(B)):
- Increased Tax on Nonqualifying HSA or Archer MSA Distributions
- The additional tax for HSA withdrawals for other than qualified medical expenses before age 65 is increased from 10% to 20%, and the additional tax for Archer MSA withdrawals for other than qualified medical expenses is increased from 15% to 20%. Distributions...
- Small Employer Simple Cafeteria Plans
- Small employers (average of 100 or fewer employees on business days during either of the two preceding years) may provide employees with a "simple cafeteria plan."
- Additional Medicare (Hospital Insurance) Tax - High-Income Taxpayers
- The Medicare (aka Hospital Insurance (HI)), tax rate (currently at 1.45%) would be increased by 0.9 percentage points on individual taxpayer earnings (wage withholding and SE tax) in excess of compensation thresholds for the taxpayer’s filing status; see table below. These amounts are not adjusted for inflation, so will remain as shown until changed by Congress.
- Surtax on Unearned Income
- A surtax called the Unearned Income Medicare Contribution Tax is imposed on individuals, estates, and trusts.
- Medical Itemized Deductions Limited
- The itemized deduction for medical expenses are limited in the following manner.
- $500,000 Compensation Deduction Limit for Health Insurance Issuers
- For services performed during that year, a covered health insurance provider isn't allowed a compensation deduction for an “applicable individual” (officers, employees, directors, and other workers or service providers such as consultants)...
- Mandatory Health Insurance Overview
- Many of the provisions of the Health Care Legislation are linked to the mandate that everyone becomes insured.
- American Health Benefit Exchanges
- Each state may establish an Insurance Exchange (more often termed the Marketplace) to help individuals and small employers that reside in their state obtain coverage. If a state fails to establish a Marketplace, its residents must use the Marketplace established by the federal government. The primary purpose of the Marketplace is to provide a source for insurance meeting the requirements of the Affordable Care Act.
- Penalty for Not Being Insured
- Non-exempt U.S. citizens and legal resident taxpayers will be penalized for failing to maintain at the least the minimum essential health coverage.
- Premium Tax Credit
- To help low income individuals and families afford health insurance the Premium Tax Credit was devised and provides a form of subsidy to help them pay the cost of health insurance. In order to qualify for the credit the health insurance must be obtained through a state insurance Marketplace or the federal insurance Marketplace where a state does not have one.
- Large Employer Health Coverage Excise Tax
- Applicable Large Employers (ALEs), generally those with 50 equivalent full-time employees in the prior calendar year, that:
- Excise Tax on High-Cost Employer-Sponsored Health Coverage
- Beginning in tax year 2018, there will be a 40% nondeductible excise tax on insurance companies and plan administrators for any health coverage plan where the premiums exceed the following amounts.
- Fee on Self-insured Health Plans -Patient-centered Outcomes Research Fee
- Section 4376 of the tax code imposes a fee equal to $2 multiplied by the average number of lives covered under the plan. The fee amount increases based on the percentage increase in the projected per capita amount of National Health Expenditures as determined by the Dept. of Health and Human Services. The amount for policy years and plan years that end on or after October 1, 2014, and before October 1, 2015, is $2.08. The plan sponsor is liable for the fee. The fees are required to be reported annually on the 2nd quarter Form 720 and paid by its due date, July 31st. Fees are based on the average number of lives covered under the policy or plan.
- Employee Notices
- Certain employers must provide written notice to employees about health insurance coverage options available through the Marketplace (insurance exchanges).
- Shared Responsibility Payment – Penalty for Being Uninsured
- Penalty Calculation - There is a penalty for not having health insurance unless one of several exemptions is met. The penalty is being phased in over three years. The monthly penalty for 2016, the final phase-in year, is the greater of $57.92 per uninsured adult plus $28.96 for each uninsured child (under age 18), but not to exceed $173.75 per month for a family, OR 2.5% of household income in excess of the individual’s income tax filing threshold divided by 12. Filing threshold is the sum of the standard deduction and personal exemption amounts for the filer and spouse, if any.