Changes to the nation’s health care system have polarized many Americans on both sides of the issue.
Some people have fought to make minimal to no changes to the way health care has been handled in the private market. Others, including President Barack Obama and the majority of the U.S. Congress who approved the plan earlier this year, sought changes to the way health care is funded and an expansion of coverage.
In September, a round of changes came into effect which will affect the ways employees, employers and tax officials handle heath care expenses. This was the topic of discussion at a recent Brown Bag Luncheon sponsored by the International Falls Area Chamber of Commerce.
Karen Brehmer, stakeholder liaison from the state IRS office, provided information to the local business community on the March 2010 Affordable Care Act, and specifically how it would impact personal and business taxes.
Forty of the 500 provisions in the Affordable Care Act impact taxes, Brehmer said.
A small business health care tax credit is one of the ways the U.S. government hoped a new law would expand availability of medical care to working adults and their families. Based on firm size and the amount of wages, small business owners can collect tax benefits for providing eligible coverage to their employees. The benefits can apply to medical, dental and vision coverage, depending on what the firm offers its employees, she explained.
The tax incentives are offered at varying levels for firms with fewer than 25 employees and average wages of $50,000 or more.
The Affordable Care Act also expanded coverage for older children. Employers can permit employees to make pre-tax contributions to pay for health coverage for children who are under age 27, even if they are not dependents on their parents taxes.
Beginning in 2014, Brehmer explained to the group attending the meeting, minimal essential coverage will be required for families meeting a government-set salary threshold. Penalties for families making more than the set salary and opting out of insurance are expected to be put into place based on current regulations. Excise taxes will be imposed in 2014 if minimum coverage is not offered by employers of more than 50 employees, coverage is unaffordable or benefits do not meet criteria.
Brehmer alluded to the fact that because the health care issue is political, changes to the plan could be enacted before 2014.
There will also be changes to the way merchants and vendors report sales on IRS Form 1099 and 1099 MISC. These could make reporting sales and purchases more challenging for entities not paying by credit card.
Local CPA Randy Pozniak also spoke regarding health savings accounts. The popularity of HSA has grown since they hit the market about six years ago, Pozniak said. He described them as an “IRA on steroids.”
The HSA allows a policy-holder to put money into a tax-free account, and not face taxes when using the funds for qualified medical expenses. Employers and employees can both contribute funds to the account. This is often used in tandem with other medical coverage.
Brehmer and Pozniak answered questions from several members of the audience regarding the changes to the health care tax provisions and how they will affect both employers and their employees.
For more information on the Affordable Care Act and changes to the tax laws, visit www.irs.gov, www.healthcare.gov and http://waysandmeans.house.gov.
