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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.
- Providing Free Preventive Care
- Effective for health plan years beginning on or after September 23, 2010, all new plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-pay or coinsurance....
- Pre-existing Condition Exclusions for Children Under Age 19
- Effective for health plan years beginning on or after September 23, 2010, for new plans and existing group plans, the new law includes rules to prevent insurance companies from denying coverage to children under the age of 19 due to a pre-existing condition....
- Elimination of Arbitrary Rescission of Coverage
- Effective for health plan years beginning on or after September 23, 2010, insurance companies may no longer retroactively cancel a policy because of sickness or an "unintentional" mistake on paperwork. The only exception is if the case involves fraud...
- Tanning Services Excise Tax
- For indoor tanning services performed on or after July 1, 2010, a new 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
- As a result of changes made by the recently enacted Affordable Care Act, health coverage provided for an employee's children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010.
- 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 and his dependents, subject to the following requirements. (Code Sec. 162(l)(1)(B))
- Tax Credits for Small Employers Offering Health Coverage
- The Patient Protection and Affordable Care Act provides a tax credit for an eligible small employer (ESE) for nonelective contributions to purchase health insurance for its employees. The term "nonelective contribution" means an employer contribution other than an employer contribution pursuant to a salary reduction arrangement.
- Employer W-2 Reporting Responsibilities
- As of tax year 2012, employers are required to disclose the aggregate cost of the benefit provided by them for employer-sponsored health insurance coverage on the employee's annual Form W-2. The amount included in the W-2 does not include contributions to Archer MSAs, Health Savings Accounts or flexible spending arrangements. This amount is for information purposes only. Employers who were required to file fewer than 250 Forms W-2 for the preceding calendar year are exempted from have to include this information on their employees’ W-2s.
- 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...
- Over-the-Counter Medication Restriction for Employer Plans
- Beginning in 2011, over-the-counter medications, except for doctor prescribed over-the-counter medication and insulin, will no longer qualify for reimbursement. This restriction applies to health reimbursement accounts (HRAs), health flexible spending...
- Small Employer Simple Cafeteria Plans
- For years beginning after Dec. 31, 2010, 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 new surtax called the Unearned Income Medicare Contribution Tax is imposed on individuals, estates, and trusts.
- Employer Health Flex-Spending Plan Contributions Limited
- One of the money-raising provisions of the health care legislation places a limit on the amount that can be contributed to a health flexible spending arrangement (FSA), starting with plan years beginning in 2013. Thus, a cafeteria plan may not allow an...
- 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 Assistance Credit
- Tax credits will be available for low-income individuals who obtain health insurance coverage with a qualified health plan (QHP) through an “Exchange”.
- Large Employer Health Coverage Excise Tax
Large employers, generally those with 50 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
- Beginning January 1, 2014 (October 1, 2013 for existing employees), 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 - Beginning in 2014, 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 2014 is the greater of $7.92 per uninsured adult plus $3.96 for each uninsured child (under age 18), but not to exceed $23.75 per month for a family, OR 1% of household income in excess of the individual’s income tax filing threshold divided by 12.