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Affordable Care Act or “Obamacare” Tax Considerations

On Behalf of | Jun 24, 2013 | FTB, IRS, Multi-State, New Laws, Tax Controversy |

The Affordable Care Act (“the Act,” commonly referred to as “Obamacare”) contains currently implemented tax provisions, as well as other that will be implemented during the next several years. According to the Internal Revenue Service, the following are some examples of the Act’s tax provisions:

· The 3.8 percent Net Investment Income Tax goes into effect in 2013 and applies to individuals, estates and trusts that have certain investment income above certain threshold amounts.

· The 0.9 percent Additional Medicare Tax goes into effect in 2013 and applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year.

· Starting in 2011, insurance companies were required to spend a specified percentage of premium dollars on medical care and quality improvement activities, meeting a medical loss ratio standard.

· The Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD.

· A 10 percent excise tax on indoor UV tanning services went into effect in 2010.

· The Act requires all health insurance issuers and self-insured group health plans to make contributions under the transitional Reinsurance Program to support payments to individual market issuers that cover high-cost individuals.

· The Act added new requirements for charitable hospitals. On June 22, 2012, the IRS issued proposed regulations which provide information on the requirements for charitable hospitals relating to financial assistance and emergency medical care policies, charges for emergency or medically necessary care provided to individuals eligible for financial assistance, and billing and collections.

· The Act amended section 162(m) of the Code to limit the compensation deduction available to certain health insurance providers. The amendment goes into effect for taxable years beginning after Dec. 31, 2012, but may affect deferred compensation attributable to services performed in a taxable year beginning after Dec. 31, 2009.

· Starting in 2014, certain employers must offer health coverage to their full-time employees or a shared responsibility payment may apply.

The above is not a comprehensive list. For a more detailed explanation by the IRS visit http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions. If you are being audited or have been assessed or penalized as a result of the provisions in the Act, or any other regulation or law, contact the Law Office of Williams and Associates for effective legal representation.


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