Health Care Reform and the IRS

[HuckleB]

http://tucsoncitizen.com/medicare/2010/09/01/health-care-reform-and-the-irs/

"The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that take effect this year and more that will be implemented during the next several years. The following is a list of provisions now in effect; additional information will be added to this page as it becomes available.

...

Small Business Health Care Tax Credit

This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers.

Employer-Provided Health Coverage — Not Taxable

Starting in tax year 2011, the Affordable Care Act requires employers to report the value of the health insurance coverage they provide employees on each employee’s annual Form W-2. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee’s income and it is not taxable.

Health Coverage for Older Children

Health coverage for an employee’s children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.


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A quick clarification on some of the items in the legislation.

:hi:

[notesdev]

1. "children under 27 years of age"?

Is the "2" a typo?

[alc]

3. not a typo. under 27 is accurate

children up to 26 can be covered by their parent's policy. It used to be 21 (I think).

[Xithras]

5. Yes, but I had an unfortunate loophole pointed out to me a few weeks ago.

The law requires insurers to offer it on their plan, but doesn't require employers to pay for it. As an example: lets say that you work for a company that covers 50% of your insurance cost, with you picking up the other 50%. Under the new law, the employer must extend the offering of any existing dependent coverage to the youth until he/she reaches 27, but it does NOT require that the employer continue to cover their 50% for that child. The coverage percentage for that dependent is entirely subject to negotiation between the employee (or their union) and the employer. A number of employers are apparently planning on responding to the requirement by demanding that the employee policyholder assume 100% of the cost of expanded benefit, which will put it well out of the budget of many families.

[notesdev]

9. What disturbs me

is people in their 20s being considered children... people who can legally drink, vote, and sign their names to legally binding contracts... these are not children.

[alc]

2. remember: Employer-Provided Health Coverage — Not Taxable

Remember this one: Employer-Provided Health Coverage — Not Taxable. Many people claim it's on the W-2 so it's taxed, which is not true. Pay attention so you can correct them.


I'd like to see more details about Small Business Health Care Tax Credit. While it sounds good, I've read that it's pretty useless because of how quickly it disappears with # of employees or salary (e.g. if you pay really bad you also get a health care credit. don't give any raises or you loose it.)

[TheMuse]

4. That is one of the Republican talking points

Because they know alot of us will not do any research and believe that because it is on the W-2 it is taxed.

[HuckleB]

6. +1

[ItNerd4life]

7. Thank you for posting! I was concerned about #2.

I was pissed actually, when I heard it was going to be taxable. Now that I know it's not, it gives a big sigh of relief.

[HuckleB]

8. You're welcome.

:hi: