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UPDATE: Revised Senate Health Bill Retains Taxes on Higher-Earning Individuals (July 2017)
On Thursday July 13, Senate Republicans released a revised version of their Better Care Reconciliation Act of 2017. The new version, if enacted, would retain several taxes imposed as part of the Patient Protection and Affordable Care Act. As in the first version of the Senate bill released in June, most of the act’s tax provisions would be repealed, but the 3.8% net investment income tax and the .9% Medicare surtax would remain in effect. Learn more in this article.
UPDATE: House Passes Measure to Repeal and Replace the Affordable Care Act (May 2017)
On May 4, the house narrowly passed the American Health Care Act which will impact individuals and businesses. Potential changes may occur as this has not yet been approved by the Senate. The new act includes change like removing the requirement for employers to offer group health coverage, dialing back the expansion of Medicaid and repealing the net investment income tax.
UPDATE: Supreme Court Upholds ACA Exchange Subsidies (June 2015)
On June 25, the U.S. Supreme Court issued a much-anticipated decision in the case of King v. Burwell in which it upheld the availability of run by the federal government. Read more from Journal of Accountancy as well as a Broadridge alert examining the ruling. Listen to a podcast from Ted Sarenski on the implications of this decision for your relevant clients.
ADVOCACY: What Exactly do Firms have to Report to Comply with Health Care Regulations? (November 2013)
The AICPA asked the IRS to clarify whether firms would have file an information return (under section 6056) for every employee under the new health care law. “This requirement would place an undue administrative burden… and result in the IRS and full-time employee receiving multiple reports containing the same information,” the AICPA observed in a letter to Acting IRS Commissioner Danny Werfel. The rule would apply to employers with more than 50 employees who work at least 30 hours a week. The AICPA also offered several recommendations to simplify the reporting process and applauded provisions in the regulations that reduce paperwork for employers. For more info on health care rules, visit the AICPA’s Health Care Reform Center.
UPDATE: ACA Tax Resources from the IRS (August 2013)
The IRS has provided a new web page focusing on the tax provisions of the Affordable Care Act (ACA). The site is a welcome resource to help practitioners, employers, individuals and families keep up with all of the tax laws and related effective dates mandated by the ACA. The AICPA’s Health Care Reform Resources Center also has useful resources for getting you up to date on the ACA.
ADVOCACY: AICPA Comments on IRS Proposed Rules on Employer Shared Responsibility for Health Insurance Coverage (March 2013)
On March 14, the AICPA submitted comments on the proposed regulations providing guidance under IRC Section 4980H on employer shared responsibility for health insurance coverage recently issued by the IRS. Recommendations cover the definition of the term “dependent,” the determination of “applicable large employer status”, the determination of “full-time employees,” and more.
UPDATE: Healthcare Reform Guidance Keeps Coming (February 2013)
The IRS issued proposed regulations covering an individual’s shared responsibility, or tax, for failure to maintain minimum essential coverage. The regulations provide need-to-know information on who is liable for the tax (individuals who either do not maintain minimum essential coverage or meet the requirements for exemption), how to calculate it, and when it is due (report it on the individual’s federal income tax return). This follows on the heels of the release of other guidance related to healthcare reform legislation, including proposed regulations related to employer shared responsibility directed at helping employers determine their obligation under the Affordable Care Act. Information on these newly released regulations, as well as other Affordable Care Act provisions, can be found at the AICPA’s Healthcare Reform Resource Center.
UPDATE: Supreme Court Upholds Healthcare Law (June 2012)
Resources for PFP/PFS members to plan for the Medicare surtax
The U.S. Supreme Court announced its ruling on the constitutionality of portions of the Patient Protection and Affordable Care Act on Thursday, June 28. The entire act was upheld, including the individual mandate and the 3.8% Medicare surtax, although the Court limited the federal government’s power to terminate states’ Medicaid funds.
The Court declared the mandate in Sec. 5000A, requiring U.S. citizens and legal residents to maintain minimum essential health coverage, to be a permissible exercise of Congress’s taxing powers under the Constitution. Further, the Court also upheld the Medicare tax on investment income in Sec. 1411, which imposes a tax on individuals equal to 3.8% of the lesser of the individual’s net investment income for the year or the amount the individual’s modified adjusted gross income exceeds a threshold amount. Note that this surtax will also apply to trusts and estates. Read more from Journal of Accountancy.
Below are resources available to PFP/PFS members to help you plan properly for the 3.8% Medicare surtax, which becomes effective January 1, 2013:
- Podcast with Bob Keebler describing personal financial planning strategies in wake of the Supreme Court decision, including the 3.8% Medicare Surtax, taking effect January 1, 2013
- Seminar recording and presentation materials from Bob Keebler’s May 31st web seminar, Planning Strategies in Wake of the New 3.8% Medicare Surtax
- Understanding the Health Care Surtax chart from Bob Keebler
- Newsletter on planning for the new Medicare surtax from The Kitces Report. Note that PFP/PFS members save 10% on a monthly subscription to The Kitces Report by using discount code AICPAPFP.
- Broadridge Alert entitled What Does the Supreme Court Ruling on the Health-Care Reform Law Mean for You?, which you can customize and send to your clients.
- More than 50% discount on Preparing Your Client for the 2013 Tax Increases: Tools, Tips and Tactics by Bob Keebler. This toolkit addresses planning for potential higher tax rates in 2013 across the board, and includes PDFs, a gain harvesting calculator, PowerPoint client presentations, a downloadable book detailing the 2013 tax implications for your clients, and more. It is essential to model various scenarios with your clients now that you can trigger as needed based on what transpires at year-end.
UPDATE: Health Care Reform Marketing Toolkit Materials Available (November 2010)
To help you inform your clients or organization about what this legislation means for them, the AICPA has prepared the following: “Health Care Reform: A Primer for Organizations” (a downloadable brochure that provides an overview of key provisions of the legislation) and “What Does Health Care Reform Mean for You” (a PowerPoint developed for you to present to the employees within your clients’ organizations or your own and which covers the important facts individuals need to know).
UPDATE: IRS Postpones Health Care Coverage Cost Reporting for 1 Year (October 2010)
The IRS has announced that employers will not be required to report the costs of employer-sponsored health care coverage on employees' Forms W-2 until 2012. The reporting was mandated by this year's health care reform legislation, but the IRS has determined that employers need more time to comply. For more information, read Notice 2010-69 and the following article from the Journal of Accountancy.
UPDATE: New Health Care Reform Web Page on AICPA.org (August 2010)
Looking for news, information and resources on health care reform? The AICPA has created an essential web page devoted to keeping you current on this important legislation. You’ll also find conferences, webcasts and CPE courses to help you learn more.
UPDATE: Health Care Reform Whitepaper (May 2010)
This informative white paper provides a comprehensive overview of the impact and implications of the new health care legislation for your firm and your clients. The information is categorized by employer size and individuals for a quick but thorough read. Click here to read the white paper.
UPDATE: Effective Tax Planning in Light of Healthcare Legislation (April 2010)
The new federal healthcare legislation contains many complex "income tax" increases, including the 3.8% Medicare “surtax” that will hit your clients if they don't plan properly.
UPDATE: Health Care Reform (March 2010)
Congress passed the Health Care and Education Reconciliation Act of 2010 (HR 4872) on March 25th. The bill was signed by President Obama on March 30th. The Reconciliation Act amends various provisions of the Patient Protection and Affordable Care Act (PL 111-148). The Reconciliation Act also adds some new provisions that were not included in the Patient Protection Act, including amending the premium assistance credit and the excise tax for those who don't purchase insurance, allowing dependents up to age 27 to be covered by a parent's health insurance and enacting a surtax on net investment income. Read a Journal of Accountancy article that outlines of the tax provisions of the Reconciliation Act.
Section 1402 of HR 4872, which was not changed by the Senate, introduces a 3.8% Medicare tax on the lesser of investment income or the excess of modified adjusted gross income over a specified threshold amount, via adding new Chapter 2A To Subtitle A of the Internal Revenue Code. Section 1402 defines “threshold amount” as $250,000 for joint filers or surviving spouses, $125,000 for married filing separately, and $200,000 in all other cases. “Net investment income” is defined to include income from interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business). It is reduced by properly allocable deductions to such income. Excluded from “net investment income” are distributions from section 401(a), 403(a), 403(b), 408, 408A or 457(b) plans. This provision applies to tax years beginning after Dec. 31, 2012. Important to note as it relates to estates and trusts, the 3.8% tax is applied to the less of undistributed net investment income or adjusted gross income over the dollar amount at which the highest trust and estate bracket ($11,200) begins.
UPDATE: Understanding the Healthcare Surtax Chart (March 2010)
Download Understanding the Healthcare Surtax Chart to better understand the new healthcare surtax and its implications for your clients. This chart from Bob Keebler serves as a quick reference guide complete with statutory overview, investment income and MAGI strategies, an explanation of the “surtax bubble” and several client examples. Download this printable chart in either 11x17 (recommended), legal or letter size.
Please note that there is an error in example 16. The solution should state “Under the lesser of rule, $248,000 will be subject to the 3.8% surtax; this is the lesser of $298,000 of excess MAGI ($548,000 ‐ $250,000) or $248,000 of investment income.”
UPDATE: Client Article on Health Care Reform (March 2010)
Recently, two pieces of legislation, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law. Together, these pieces of legislation make the most significant reform to health care in the United States since the enactment of Medicare. Request 3 brief client articles from Broadridge Advisor that describe some of the most important provisions of the health care reform legislation. Distribute these articles to your clients to help answer their questions about this landmark legislation.