Tax Briefs (2013-18)

January 1, 2013 (Back to Tax HRN 2013-18)  
 

Taxes: Start date of new $2,500 cap on the amount of money American taxpayers can contribute tax-free annually to a Flexible Savings Account. The Joint Committee on Taxation estimates that this provision will cost Americans an additional $13 billion in taxes over 10 years. Effective for tax years beginning after December 12, 2012. (H.R. 4872 Sec. 1403)

 

Taxes: Start date of a 0.9 percentage point increase in the Medicare payroll tax and a new 3.8 percent tax on unearned, non-active business income. The tax applies to individual taxpayers earning more than $200,000 ($250,000 for taxpayers filing jointly). The Joint Committee on Taxation estimates that this provision will cost Americans an additional $210 billion in taxes over 10 years. Effective for tax years beginning after December 31, 2012. (Sec. 9015 and H.R. 4872 Sec 1402)

 

Taxes: Start date of an increase in the threshold for the deduction of medical expenses (from 7.5 percent to 10 percent of adjusted gross income). The Joint Committee on Taxation estimates that this provision will cost Americans an additional $15 billion in taxes over 10 years. Effective for tax years beginning after December 31, 2012. (Sec. 9013)

 

Taxes: Deadline to eliminate the deduction for employers who maintain prescription drug plans for their Medicare Part D-eligible retirees. Effective for tax years beginning after December 31, 2012. (Sec. 9012, H.R. 4872 Sec. 1407)

 

Taxes: Start date of a new 2.3 percent excise tax on medical devices manufacturers. Devices exempted from this tax include eyeglasses, hearing aids, contact lenses and other devices as determined by the Secretary to be of a type generally purchased by the general public at retain for individual use. The Joint Committee on Taxation estimates that this tax will cost Americans an additional $20 billion in taxes over 10 years. Effective for tax years beginning after December 31, 2012. (Sec. 9009, H.R. 4872 Sec. 1405)

 

Taxes: Start date of a new $500,000 deduction cap on insurance company employee and officer compensation. Effective for tax years beginning after December 31, 2012 for services performed after December 31, 2009. (Sec. 9014)

 

Taxes: Start date for a new tax on insured and self-insured health plans, levied to fund the Patient-Centered Outcomes Research Institute (comparative effectiveness research center). (Note: the statute makes the tax effective for plan years ending after September 30, 2012; the tax is likely to go into effect for most plans after January 1, 2013. (Sec. 6301)

 

January 1, 2014  
 

Individual Requirements: Most individuals must maintain insurance coverage for themselves and their dependents or pay a new penalty (Sec. 1501).

o Coverage may be: Part A of Medicare, Medicaid, SCHIP, the TRICARE for Life program, the veterans’ health care program, the Peace Corps program, an eligible employer-sponsored plan, plans in the individual market, a grandfathered health plan, and any other health benefits coverage, such as a State health-benefits risk pool, as recognized by the Secretary. (Sec. 1501 and Sec. 1312)

 

o Penalties: Individuals who fail to comply with the health insurance coverage mandate must pay a penalty for themselves and their dependents for each month they are in non-compliance. The penalty is the greater of either (1) a percentage of applicable income or (2) a flat dollar amount. Applicable income is the amount household

income exceeds its personal exemption for a tax year. The penalty amount based on household income is one percent in 2014, two percent in 2015, and 2.5 percent in 2016 and later years.

 

The annual flat-dollar penalty is phased-in ($95 in 2014, $325 in 2015, $695 in 2016, and adjusted for inflation thereafter), and the penalty is assessed for each taxpayer and any dependents. The flat-dollar penalty is reduced by 50 percent for dependents under the age of 18. Regardless of family size, a family’s penalty is capped at 300 percent the flat-dollar amount, and the penalty for noncompliance can not exceed the national average premium for bronze-level qualified health plans offered through an Exchange (for the relevant family size). (Sec. 1501)  
 
o Exempt individuals include those with certain qualifying religious exemptions, those in a health care-sharing ministry, individuals not lawfully present in the United States, incarcerated individuals, those without coverage for less than 90 days (with only one period of 90 days allowed in a year), members of Indian tribes with income less than a specified amount, individuals who would have to contribute more than 8 percent of income to pay for the insurance premium, or any individual who the Secretary determines to have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan. (Sec. 1501)

 

Employer Requirements

o Most employers with 50 or more full-time equivalent employees, with at least one full-time employee (30 hours/week) who purchases insurance subsidized with a taxcredit through the Exchange, would have to pay a monetary penalty. The penalty is calculated according to a formula based on whether or not the employer offers health

coverage.

􀂃 If the employer does not offer qualified health insurance coverage and at least one employee receives a tax credit for the purchase of insurance through an Exchange, then the annual penalty is: $2,000 times the number of full-time

employees minus 30 employees (e.g., a firm with 100 full-time employees would have to pay the $2,000 annual penalty on 70 employees; (100 – 30) x $2,000 = $140,000 total annual penalty).

􀂃 If the employer offers qualified health insurance coverage but at least one employee declines the insurance coverage, and uses a tax credit premium subsidy to buy health insurance through an Exchange, then the annual penalty

is the lesser of (a) the penalty outlined above, or (b) $3,000 times the number

of full-time employees who received a tax-credit to buy insurance through the Exchange. (Sec. 1513 as amended by H.R. 4872 Sec. 1003)

o Employers with more than 50 full-time equivalent employees must report to the Secretary information on their employees who accept and do not accept insurance. (Sec. 1514)

o Employers with more than 200 full-time employees who offer health benefits must automatically enroll new employees into an offered plan, unless the employee opts out of enrollment. (Sec. 1511)

 
Taxes: Start date of new Federal tax on health insurance companies, which the Joint Committee on Taxation estimates will cost American taxpayers $60 billion over 10 years. (H.R. 4872 Sec. 1406)   
 
Taxes: Start date of increase in corporate estimated tax by 15.75 percent. (H.R. 4872 Sec. 1410)   
 
January 1, 2018
 
Taxes: Start date for new Federal tax on high-cost insurance plans (known as the “Cadillac Tax”) with a 40 percent tax on benefit values above a certain threshold ($10,200 individual coverage, $27,500 family, indexed for inflation). Effective for tax years beginning after December 31, 2017. (Sec. 4980I, H.R. 4872 Sec. 1401).    
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