healthcare Archives | Rick Norris

CPA Tip: Do You Qualify for a Health Insurance Coverage Exemption?

Our nation has been on an information roller coaster with the Affordable Care Act. Businesses, individuals, and even insurance agents have reeled from the information gap.

Before calling your insurance agent, brush up on health care insurance eligibility provided by the IRS, below. It is a good start to understanding your healthcare obligations.

The Affordable Care Act calls for individuals to have qualifying health insurance coverage for each month of the year, have an exemption, or make a shared responsibility payment when filing his or her federal income tax return.

You may be exempt from the requirement to maintain qualifying health insurance coverage, called minimum essential coverage, and may not have to make a shared responsibility payment when you file your next federal income tax return. .

You may be exempt if you:

Have no affordable coverage options because the minimum amount you must pay for the annual premiums is more than eight percent of your household income,
Have a gap in coverage for less than three consecutive months, or
Qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage or belonging to a group explicitly exempt from the requirement.

The IRS website, IRS.gov/aca, has a comprehensive list of the coverage exemptions.

How you get an exemption depends upon the type of exemption. You can obtain some exemptions only from the Marketplace in the area where you live, others only from the IRS, and yet others from either the Marketplace or the IRS.

Additional information about exemptions is available on the Individual Shared Responsibility Provision web page on IRS.gov. The page includes a link to a chart that shows the types of exemptions available and whether they must be granted by the Marketplace, claimed on an income tax return filed with the IRS, or by either the Marketplace or the IRS. For additional information about how to get exemptions that may be granted by the Marketplace, visit HealthCare.gov/exemptions

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Healthcare Deadline: An (Un)necessary evil, or a Milestone in History? Either way it’s the Law

Health Care Law Considerations for 2014 and the March 31 Deadline

Here is some advice from the IRS that may help.

For most people, the Affordable Care Act has no effect on the 2013 income tax return they are filing in 2014. However, some people may need to make important decisions by the March 31, 2014 deadline for open enrollment.

Below are five things about the health care law you may need to consider soon.

• Currently Insured – No Change: If you already insured, you do not need to do anything more than continue your insurance.

• Uninsured – Enroll by March 31: The open enrollment period to purchase health care coverage through the Health Insurance Marketplace for 2014 runs through March 31, 2014. When you get health insurance through the marketplace, you may be able to get advance payments of the premium tax credit that will immediately help lower your monthly premium. Learn more at HealthCare.gov.

• Premium Tax Credit To Lower Your Monthly Premium: If you get insurance through the Marketplace, you may be eligible to claim the premium tax credit. You can elect to have advance payments of the tax credit sent directly to your insurer during 2014 so that the monthly premium you pay is lower, or wait to claim the credit when you file your tax return in 2015. If you choose to have advance payments sent to your insurer, you will have to reconcile the payments on your 2014 tax return, which will be filed in 2015. If you’re already receiving advance payments of the credit, you need to do nothing at this time unless you have a change in circumstance like a change in income or family size. Learn More.

• Change in Circumstances: If you’re receiving advance payments of the premium tax credit to help pay for your insurance coverage, you should report life changes, such as income, marital status or family size changes, to the Marketplace. Reporting changes will help to make sure you have the right coverage and are getting the proper amount of advance payments of the premium tax credit.

• Individual Shared Responsibility Payment: Starting January 2014, you and your family have been required to have health care coverage or have an exemption from coverage. Most people already have qualifying health care coverage. These individuals will not need to do anything more than maintain that coverage throughout 2014. If you can afford coverage but decide not to buy it and remain uninsured, you may have to make an individual shared responsibility payment when you file your 2014 tax return in 2015. Learn More.

More Information

Find out more tax-related provisions of the health care law at IRS.gov/aca.

Find out more about the Health Insurance Marketplace at HealthCare.gov.

CPA Tax Tip: Healthcare and Taxes

There is a lot of confusion about healthcare and taxes.

The IRS has provided some guidance that may help.

1. Employment Status

If you are employed your employer may report the value of the health insurance provided to you on your W-2 in Box 12 with Code DD. However, it is not taxable.
If you are self-employed, you can deduct the cost of health insurance premiums, within limits, on your income tax return.

2. Tax Favored Health Plans

If you have a health flexible spending arrangement (FSA) at work, money you put into it normally reduces your taxable income.
If you have a health savings account (HSA) at work, money your employer puts into it for you, within limits, is not taxable.
Money you put into an HSA usually counts as a deduction and can lower your taxes.
Money you take from an HSA to use for qualified medical expenses is not taxable income; however, withdrawals for other purposes are taxable and can even be subject to an additional tax.
If you have a health reimbursement arrangement (HRA) at work, money you receive from it is generally not taxable.

3. Age

If you are age 65 or older, the threshold for itemized medical deductions remains at 7.5 percent of your Adjusted Gross Income (AGI) until 2017; for others the threshold increased to 10 percent of AGI in 2013. Your AGI is shown on your Form 1040 tax form.

More Information

Find out more about the tax-related provisions of the health care law at IRS.gov/aca.

Find out more about the health care law at HealthCare.gov.

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Help! Where Do I Go To Learn About the Affordable Care Healthcare Act?

No, I am not quoting our elected officials.

We have provided a supporting role to our clients about healthcare. However, as healthcare changes in this county, it is good to find a place that can answer your questions. In addition to professionals, the IRS is trying to help both individuals and businesses.

The IRS offers an Affordable Care Act Tax Provisions website at IRS.gov/aca to educate individuals and businesses on how the health care law may affect them. The home page has three sections, which explain the tax benefits and responsibilities for individuals and families, employers, and other organizations, with links and information for each group. The site provides information about tax provisions that are in effect now and those in the future.

Topics include premium tax credits for individuals, benefits and responsibilities for employers, and tax provisions for insurers, tax-exempt organizations and certain other business types.

Visitors to the site will find information about the law and its provisions, legal guidance, the latest news, frequently asked questions and links to additional resources.

Several other federal agencies have a role in implementing the health care law, including the Department of Health and Human Services, which has primary responsibility. To help locate additional online resources from the Department of Health and Human Services, the Department of Labor and the Small Business Administration, the IRS has issued a new Web-based flyer – Healthcare Law Online Resources (Publication 5093).

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The Affordable Care Act and the Small Business

If you are unsure on how the Healthcare Act will affect your business in the near future, you can find answers at the Department of Labor web site. The main question is if an employer can be fined for failing to provide employees with notice about the ACA new health insurance markets? Some businesses were concerned about the $100 fine for not doing so.

Background: The ACA requires employers to provide their workers with a notice about the state health insurance exchanges. These exchanges will sell insurance to individuals who don’t get coverage through their employers. The exchanges are also available to small businesses.

The notice should inform employees:

About the Health Insurance Marketplace;
That, depending on their income and what coverage may be offered by the employer, they may be able to get lower cost private insurance in the Marketplace; and
That if they buy insurance through the Marketplace, they may lose the employer contribution (if any) to their health benefits

The U.S. Department of Labor has two model notices to help employers comply. There is one model for employers who do not offer a health plan and another model for employers who offer a health plan or some or all employees:

The model notices are also available in Spanish and MS Word format at https://www.dol.gov/ebsa/healthreform/.

Employers may use one of these models, as applicable, or a modified version. More compliance assistance information is available in a Technical Release issued by the US Department of Labor.

The answer to the persistent question though is: No. If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.

Businesses should stay on top of such laws or make an alliance with a health insurance professional to keep you abreast of all developments.

Affordable Care Act (Obamacare) Guidance is Coming to Employers

Employers who employ generally 50 full-time employees will have some guidance to the new tax act in regards to their new shared responsibility. Code section 6056 requires large employers to file information returns that contain:

Name
Date
FEIN
Certification as th whether the employer offers its full-time employees minimal coverage
Employment must be filed by month

For small business, some guidance has already been provided on the IRS sitewhich includes reporting on the employee’s W-2. Employers should seek out tax advisors and contact their payroll companies to make sure they are in compliance.

The affordable care act implementation is changing rapidly. As 2014 draws near, regulations will continue to mount. Small businesses will have to monitor each change and judge whether they are applicable to their small business.

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Obamacare and the Mixed Up World of Small Business

“If I had a world of my own, everything would be nonsense. Nothing would be what it is because everything would be what it isn’t. And contrary-wise; what it is it wouldn’t be, and what it wouldn’t be, it would. You see?” Alice from Alice in Wonderland.

Welcome to Alice’s world. The Patient Protection and Affordable Care Act (aka Obamacare), has rekindled the debate of its essence. However, regardless of your political views on the law, here are some facts that a small business needs to know. A majority of these tax points come from Supreme Court Upholds Health Care Act by Schreiber and Nevus written in the Journal of Accountancy article.

Premium-assistance credit (Sec. 36B): Some individuals can take advantage of refundable tax credits to help cover the cost of health insurance premiums for individuals and families who purchase health insurance through a state health benefit exchange. (Effective 2014.)
Small business tax credit (Sec. 45R): Just like last year, small businesses—defined as businesses with 25 or fewer employees and average annual wages of $50,000 or less—would be eligible for a credit of up to 50% of non-elective contributions the business makes on behalf of their employees for insurance premiums. (Effective 2010.)
Medical care itemized deduction threshold (Sec. 213): Unfortunately the threshold for the itemized deduction for unreimbursed medical expenses is increased from 7.5% of adjusted gross income (AGI) to 10% of AGI for regular income tax purposes. This makes any medical deduction almost impossible to deduct unless catastrophic. Try opening a flexible benefit plan or incorporate (Effective 2013 generally, 2017 for certain taxpayers.)
Additional hospital insurance tax on high-income taxpayers (Sec. 3101): Employee portion of the Medicare hospital insurance tax part of FICA is increased by 0.9% on wages that exceed a threshold amount. (Effective 2013.)
Employer responsibility (Sec. 4980H): An “applicable large employer” that does not offer coverage for all its full-time employees, offers minimum essential coverage that is unaffordable, or offers minimum essential coverage that consists of a plan under which the plan’s share of the total allowed cost of benefits is less than 60%, is required to pay a penalty if any full-time employee is certified to the employer as having purchased health insurance through a state exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee. (Effective 2014.)
Excise tax on high-cost employer plans (Sec. 4980I): Excise tax on coverage providers if the aggregate value of employer-sponsored health insurance coverage for an employee (including, for purposes of the provision, any former employee, surviving spouse, and any other primary insured individual) exceeds a threshold amount. (Effective 2018.)
Tax on health savings account (HSA) distributions (Sec. 223): Additional tax on distributions from an HSA or an Archer medical savings account (MSA) that are not used for qualified medical expenses is increased to 20% of the disbursed amount. Be careful what you put into these accounts (Effective 2011.)
Health flexible spending arrangements (FSAs) (Sec. 125(i)): Maximum amount available for reimbursement of incurred medical expenses under a health FSA for a plan year (or other 12-month coverage period) must not exceed $2,500. This is up from $5,000, and definitely will hurt employees (Effective 2013.)
SIMPLE cafeteria plans for small business (Sec. 125): An eligible small employer is provided with a safe harbor from the nondiscrimination requirements for cafeteria plans as well as from the nondiscrimination requirements for specified qualified benefits offered under a cafeteria plan. (Effective 2011.)
Information reporting (Sec. 6051(a)(14)): Requires employers to disclose on each employee’s annual Form W-2 the value of the employee’s health insurance coverage sponsored by the employer. (Effective 2012.)

Small businesses must be very vigilant over the next two years to verify that they are eligible for the credit and that they are conforming to the law in very respect.

CPA Reminder: 2012 Self-employed Healthcare Credit

Yes, I know. Health insurance is very high and a drag on the small business. So, lessen the pain by taking the healthcare credit if you qualify. Here are the facts:

Starting in tax year 2011, you take the credit on Form 1040.

However, you must be one of the following to qualify:

A self-employed individual with a net profit reported
on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ
(Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit
or Loss From Farming.
A partner with net earnings from self-employment
reported on Schedule K-1 (Form 1065), Partner’s Share of Income,
Deductions, Credits, etc., box 14, code A.
A shareholder owning more than 2 percent of the
outstanding stock of an S corporation with wages from the corporation
reported on Form W-2, Wage and Tax Statement. This last situation catches clients off guard because they have to do an odd adjustment to their W-2. Our bookkeepers work with clients to properly report their payroll. If you did not properly include the health insurance in your W-2, then you should amend it.

The insurance plan must be established under your business.

For self-employed individuals filing a Schedule C,
C-EZ, or F, the policy can be either in the name of the business or in the
name of the individual.
For partners, the policy can be either in the name of
the partnership or in the name of the partner. You can either pay the
premiums yourself or your partnership can pay them and report the premium
amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included
in your gross income. However, if the policy is in your name and you pay
the premiums yourself, the partnership must reimburse you and report the
premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be
included in your gross income. Otherwise, the insurance plan will not be
considered to be established under your business.
For more-than-2-percent shareholders, the policy can be
either in the name of the S corporation or in the name of the shareholder.
You can either pay the premiums yourself or your S corporation can pay
them and report the premium amounts on Form W-2 as wages to be included in
your gross income. However, if the policy is in your name and you pay the
premiums yourself, the S corporation must reimburse you and report the
premium amounts on Form W-2 as wages to be included in your gross income.
Otherwise, the insurance plan will not be considered to be established
under your business.

If this in confusing, speak to your CPA. The deduction is too good to pass up.

IRS Source

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Healthcare Reform: If It Walks Like a Duck and Quacks Like a Duck…We’ll Call it a Toad

I just returned from a great informative panel on healthcare reform presented the by the LA chapter of the Association of Strategic Planning. I was surprised to learn that many large and smaller companies are trying to use the independent contractor designation to reduce healthcare benefits for employees. I wrote about a similar topic in the National Healthcare Reform Magazine back in August. My article warned employers about the misclassification of an employee, and how it could sabotage their tax credit.

What I didn’t think of, were companies intentionally trying to circumvent the tax laws in order to save healthcare insurance. This can be very risky. The IRS is no stranger to businesses trying to reclassify employees as independent contractors in order to save payroll taxes. The rules are complex and employee definitions differ from state to state. However, I tell clients that if you tell your “contractor” how to do his/her job, you run the risk of the person being classified as an employee(thunbnail definition.)

Now, I can imagine these companies trying to align themselves with the Fedex case where the U S District Court ruled the drivers as independent contractors instead of employees. But now the risks involved in this aggressive stance is not only healthcare insurance penalties, but payroll taxes, and workers’ compensation issues(not to mention labor law issues.)

Be very careful when classifying those who work for you. A tax professional may be your best friend in keeping you out of “fowl” play.

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Health Care Act Tax Credit: The Problems of Misclassifying an Employee as an Indepedent Contractor

Health Care Act Tax Credit