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Patient Protection and Affordable Care Act - Emil Estafanous, CPA : Emil Estafanous, CPA

Patient Protection and Affordable Care Act

President Obama on Mar 23rd, 2010, sealed into law a Patient Protection and Affordable Care Act that was subsequently mutated by Congress by a Health Care and Education Reconciliation Act of 2010, sealed on Mar 30, 2010.

Following is a list of a highlights of a taxation supplies and a employer responsibilities provisions. Soon no fewer than 3 sovereign agencies, a Internal Revenue Service, Health and Human Services, and a Department of Labor will start drafting a compulsory regulations that individuals, employers, word carriers, and state word commissioners and state exchanges will need to follow.

Codification of Economic Substance Doctrine and Penalties
  • The Economic Substance Doctrine is codified as requiring that both of a following mandate contingency be met to prove a doctrine: (1) a transaction changes a taxpayer’s mercantile position in a suggestive approach (apart from Federal income taxation effects); and (2) a taxpayer has a estimable purpose for entering into a transaction (apart from Federal income taxation effects). The sustenance is effective for sell entered into after a date of dramatization (March 30, 2010).A territory 6662 chastisement is total for an underpayment attributable to a disallowance of claimed taxation advantages since a transaction lacked mercantile substance. The chastisement is 20 percent (40 percent if a transaction is not sufficient disclosed) and there is no reasonable means exception.
Increased Threshold for Medical Expense Itemized Deductions
  • The 7.5% of AGI threshold for a medical responsibility itemized reduction will boost to 10%, effective for taxable years commencement after 2012. An difference relates by 2016 for taxpayers age 65 or older.
Small Businesses Tax Credits to Offset a Impact of a Employer Mandate
  • Firms with fewer than 25 employees and normal annual income of reduction than $50,000 will be authorised for a credit for certain contributions to squeeze health word for employees. The credit phases in from 35% of a employers grant to 50% by 2014. Smaller firms with 10 or fewer employees and normal annual income of reduction than $25,000 can get adult to a 100% credit. Effective for taxable years commencement after 2009.
  • Not enclosed in a clarification of an worker are anniversary workers, self employed individuals, 2 percent shareholders of an S Corporation , 5% owners of a tiny business, and dependents. Leased employees are authorised for a credit. These manners are effective as of date of enactment.
W-2 Forms will be Required to Include Information on Employee Health Benefits.
  • Employers will be compulsory to embody on an employee’s W-2 a value of health advantages supposing to a employee. This will spin effective for taxable years commencement after 2010.
Special Cafeteria Plans for Small Employers
  • Small employers will be accessible to adopt new “simple cafeteria plans” that will embody protected bay appearance and grant manners identical to those in SIMPLE 401(k) or SIMPLE IRA manners effective for taxable years commencement after 2010. By gratifying a smallest appearance and grant mandate a employer will not be compulsory to accommodate a non-discrimination manners that differently would apply.
Limitation on Health Flexible Spending Arrangements underneath Cafeteria Plans
  • For taxable years after 2012, in sequence for a health FSA to be a competent advantage underneath a cafeteria plan, a limit volume accessible for payment of medical losses incurred by a employee, a employee’s dependents, and other authorised beneficiaries with honour to a worker contingency not surpass $2,500 for a devise year (indexed for inflation).
Increase in Additional Tax on Distributions from HSA or Archer MSA
  • The additional taxation on distributions from an HSA or an Archer MSA that are not used for competent medical losses is increasing to 20 percent of those distributions, effective for distributions done during a taxation years starting after 2010.
Increased Medicare Tax – Employer Withholding Responsibilities
  • An employer is compulsory to secrete from income a employee’s apportionment of a Medicare taxation now partial of a FICA taxation and equal to 1.45 percent of lonesome wages. Employers will be compulsory to secrete a new .9% Medicare surtax on employees whose income surpass $200,000. However, a employer is not compulsory to take into comment a spouses income if a total incomes exceeds a threshold.
New Medicare Tax on Unearned Income
  • Individuals, estates and trusts will be theme to a Medicare taxation on unmerited income. For individuals, a taxation will be 3.8 percent of (1) net investment income or (2) additional of mutated AGI over a threshold amount, whichever is lower. The threshold is $250,000 for a corner return, $125,000 for married filing separately, and $200,000 for a singular taxpayer. The sustenance is to request for taxable years commencement after 2012.
New Excise Tax on Employer formed “Cadillac” Group Health Plans
  • After 2018 a reward dig taxation to be paid by a word association will request to medical skeleton where a reward threshold is incomparable than $10,200 for people and $27,500 for families. The dig taxation is 40% of a additional and is non-deductible.

New Employer Health Coverage Responsibilities and Benefits

Eliminating Pre-existing Conditions as a Coverage Limitation
  • Until concept coverage is accessible a module to accommodate those with pre-existing conditions, a “temporary high risk health word pool” is to be total within 90 days underneath terms of a Public health Service Act.
Mandated Coverage or Penalties for Employers that Fail to Offer Health Coverage
  • Beginning in 2014, firms with 50 or some-more employees that destroy to offer health coverage will catch a chastisement of $2,000 per full time employee. (The calculation exempts a initial 30 employees).
Automatic Enrollment of New Employees
  • For firms with some-more than 200 employees, day one health word coverage on employing is involuntary unless a worker opts out and demonstrates other coverage.
Penalties for Firms that have a Plan with an Extended Enrollment Waiting Period
  • In 2014 a chastisement for firms with some-more than a 90 day watchful duration for enrollment will be imposed. Most firms will be compulsory to have a 30 day enrollment duration with firms incomparable than 200 employees theme to an involuntary day one enrolment.
Required Employer Notifications to Employees
  • An employer will be compulsory to surprise employees of a accessibility of state exchanges as options to squeeze health coverage and that a employer will be compulsory to yield a same funding to a worker as a employer formed coverage. Employees need to be sensitive about a accessibility of taxation credits for purchasing their possess coverage by an exchange. This information will need to be supposing to employees no after than Mar 2013.
Prior Health History might not be used as Criteria to Determine Eligibility for Coverage or To Determine Premium Amounts
  • No employer or devise issuer can settle eligibility manners formed on before health history.
  • In substantiating premiums in a particular or organisation marketplace a premiums can usually change by a following factors; family vs. particular coverage, geography, age bands and tobacco use.

An Employer might not Cancel an Employee’s Coverage and in spin a Employer might not be Cancelled by their Plan Issuer

  • An employer or word association might not cancel coverage solely underneath really singular circumstances.
Employers Prohibited from Plan Discrimination Based on Salary
  • Similar to competent grant skeleton an employer might not distinguish formed on income in preference of rarely compensated employees. Supplemental executive remuneration arrangements expected will be prohibited. Closely hold firms with special remuneration packages for rarely compensated employees will no longer be accessible to provide these as business losses though usually as additional remuneration to those individuals.

In a entrance months a obliged sovereign agencies will start to post a regulations that will request to these new rules. We will continue to keep we posted on group manners and regulations as they are released.


This e-mail represents a ubiquitous overview of taxation developments and should not be relied on but an independent, veteran research of how any of these supplies might request to a specific situation. Any taxation information contained in a physique of this e-mail was not dictated or created to be used, and can't be used, by a target for a purpose of avoiding penalties that might be imposed underneath a Internal Revenue Code or germane state or internal taxation law provisions.

Tax Section E-Alert, Vol. 7, No. 7, Apr 9, 2010. Prepared by a staff of a Tax Division of a American Institute of Certified Public Accountants, Inc. and edited by William R. Stromsem, Director and Abraham Schneier, Senior Manager. Editorial offices during 1455 Pennsylvania Avenue, NW, Washington, DC 20004-1081. Copyright © 2010 by a American Institute of Certified Public Accountants, Inc., New York, New York.

Tax Section Member Service Contact Information Members can refurbish their annals and ask questions about Tax Section member advantages during 800-513-3037 or taxsection@aicpa.org.

About Emil Estafanous, CPA
Certified Public Accountant (CPA) Tax Professional committed in representing taxpayers and resolving their tax problems.

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