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 | Suzanne LoBiondo, CPA
516-791-1303 x306
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 | Chris Cheeseman, CPA
516-791-1303 x305
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Dear Clients and Friends,
We hope this edition of "News You Can Use" finds you well, and that you are enjoying your summer so far.
Last month our newsletter focused on one of the major tax provisions of the Patient Protection and Affordable Care Act. At the time, the constitutionality of the Act was being challenged in the Supreme Court. On June 28th, the Supreme Court's decision to uphold the health care law was announced.
While some provisions of the Act are already in effect, several significant provisions are scheduled over the next two years, unless Congress takes action to change or repeal.
Please feel free to contact us with any questions you may have. Thank you for your continued faith in us as your trusted advisors.
Very truly yours,
Suzanne LoBiondo and Christopher Cheeseman
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Individual Mandate to Purchase Health Insurance | |
The biggest decision for the Supreme Court was whether individuals could be mandated to buy insurance or pay a penalty if they don't. While the justices viewed the mandate as a violation of the commerce clause, they upheld the mandate as a form of tax. Chief Justice Roberts said "The federal government does not have the power to order people to buy health insurance. The federal government does have the power to impose a tax on those without health insurance".
So what does this mean? In 2014, the mandate begins, and all individuals must have health insurance or pay a "penalty" with their tax return. Some may opt to pay the penalty, as it will be significantly less than the cost of the insurance, and it phases in over a few years.
To make the cost of health care more affordable, insurance will be available from exchanges sponsored by state or federal governments and taxpayers may be eligible for a refundable credit on these premiums. Limits will exist on families' out-of-pocket spending on deductibles, co-insurance, and co-payments. Insurance companies will not be allowed to deny coverage or charge higher premiums for preexisting conditions. |
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Employer Coverage | |
By 2014, businesses with more than 50 full-time employees will have to provide coverage or face penalties. The annual penalty is $2,000 per full-time employee in excess of 30 workers. (For example, if the employer has 32 full-time employees, the penalty would be $4,000.) The definition of full-time employees is done in equivalents.
Employers that do provide coverage could also face penalties if it isn't deemed affordable. Penalties will be triggered if 1) the coverage doesn't cover at least 60% of covered health care expenses for a "typical population," or 2) the premium for the coverage exceeds 9.5% of a worker's income. In such cases, the worker can opt to obtain coverage in an exchange and qualify for a tax credit. For each worker receiving the credit, the employer must annually pay a penalty - the lesser of $3,000 per employee for each employee receiving a premium credit or $2,000 for each full-time employee beyond the first 30 employees.
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Other Provisions |
Beginning this year, employers who filed 250 or more W-2 forms for 2011, must report employer provided health care premiums on employees' 2012 W-2 forms. The amount reported does not affect the employee's tax liability, as the value of the employer's contribution to the employee's health coverage will continue to be excluded from income and is not taxable.
Beginning in 2013, there is a .9% Medicare Tax increase on self-employment income and wages, and a 3.8% Medicare Tax on unearned income (see our June 2012 newsletter for details on this).
Currently, Flexible Spending Accounts allow employees to contribute up to $5,000 pretax. As of 2013, under the Act, they face an annual limit of $2,500.
For 2013, the threshold for the itemized deduction for unreimbursed medical expenses is increased from 7.5% of AGI to 10% of AGI for regular income tax purposes. By reducing the amount contributed to an FSA, and increasing the AGI threshhold for deductible medical expenses, thereby limiting the tax benefits of out-of-pocket health costs, the Act is pushing taxpayers to get health coverage. The purpose of the federal health reform legislation is to assure that all Americans have access to affordable health insurance. It remains to be seen if this goal will be accomplished.
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| About C&L Tax and Accounting Services LLP |
 C&L Tax and Accounting Services LLP is a boutique CPA firm that specializes in meeting the tax and accounting needs of individuals and small businesses. Our experienced tax and accounting professionals offer clients insightful and strategic tax planning and compliance services that maximize savings year after year. C&L Tax and Accounting Services LLP's offers a wide range of tax and accounting planning, compliance and consulting services for both individuals and small businesses. We invite you to peruse our capabilities and contact us for a consultation. |
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