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  • Home
  • About
    • Ronson J. Shamoun, ESQ., LL.M.
    • Chandara Diep, ESQ., LL.M.
    • Joseph Cole, ESQ., LL.M.
    • Devon J. Arabo, ESQ., LL.M.
    • Lauren Suarez, ESQ., LL.M.
    • Daniel Huynh, Esq., LL.M.
    • Christopher Engelmann, ESQ., LL.M.
    • Leslie Miranda, Esq., LL.M.
    • Brian M. Malloy, Esq.
    • Steve S. Mattia, Esq.
    • Sam Imandoust, ESQ., LL.M
    • Kaveh Imandoust, JD, MBT, CPA
    • Andrea Cisneros Valdez, Esq., LL.M.
    • Martin Schainbaum, ESQ., LL.M.
    • Dod Ghassemkhani, ESQ.
    • Vincent Renda, Esq.
    • Pedro Bernal, Esq.
    • Melanie M. Shamoun
    • Sandie Portilla
    • Renae Arabo
    • Sabri P. Shamoun
    • Hilary Dargavell
    • Lupita C. Torres
    • Jewell Cornejo
    • Kesia Belford
    • Remy Hogan
    • Judith Jeremie
    • Marley Smith-Peters
    • Melanie Chan
    • Tanner DeMera
    • Charles Ecker
    • Anna Gurr
    • Asia Smith
  • Practices
    • ERTC – Call Us Before It’s Too Late!
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS LAW for IRS Appeals
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • What are IRS Field Audits?
          • Initial IRS Compliance Center Audits
          • IRS Office Audits
          • What happens in an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • NOTICES
          • IRS Notices
          • IRS Letters
          • FTB Notices
          • Avisos en Español
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearing
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • ACS – Automated Collection System
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • RJS LAW Approach to Collections
          • IRS Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders
        • IRS Payroll Tax
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • Trust Fund Recovery Penalties
        • IRS Wealth Squad
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          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing an Offer in Compromise
          • How does the IRS evaluate an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Choose RJS LAW?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
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        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • CDTFA – California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration – CDTFA
        • California State Tax Matters – California Franchise Tax Board | FTB | EDD
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • International Tax
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    • Trust Litigation
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
    • Civil Litigation
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    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
  • Tax Institute
    • 8th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 28th, 2023
    • 7th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 15th 2022
    • 6th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 5th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 4th Annual USD School of Law – RJS LAW Tax Controversy Institute
  • Testimonials
  • Giving
    • Giving
    • RJS Law Donates Billboard to the Girl Scouts
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The Affordable Care Act and Your Taxes

Affordable Care Act

Time is almost up to enroll in the Affordable Care Act’s (ACA) federal or state marketplace health care, and if you are not enrolled in minimum coverage health insurance by March 31, 2014 you must pay a penalty. We know the Affordable Care Act is confusing, so we tried to break it down and put it in layman’s terms so you know exactly what’s in store for the future.

The new healthcare law mandates everyone have what’s called “minimum essential coverage.” This includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE, and certain other coverage options.

Individual Penalty: 

– If you do not enroll in health insurance before March 31st, you will have to pay a fee, often called the “penalty” or “shared responsibility payment.” There are some exemptions to this rule such as religious objections, people who earn too little to file tax returns, and those for whom insurance would eat up more than 8% of their income, among others.
– Not everyone will pay the same amount of penalty for not enrolling in health care. For 2014, the individual penalty is whichever of the following is higher:

– 1% of your yearly household income (only the amount above the tax filing threshold is used, $10,150 for an individual)
– $95 per person for the year($47.50 per child under 18).

Individuals who lack coverage for only part of the year will only pay part of the penalty, and individuals who are without coverage for less than 90 days do not need to pay the penalty either.
– This penalty increases every year following the scale below:

– 2015 it is 2% of income or $325 per person
– 2016 it rises to 2.5% of income or $695 per person
– 2017 onwards the penalty is adjusted for inflation

– Once the IRS determines this penalty should be assessed they will immediately do so. No notice is required, no 90-day period, no access to Tax Court, no right of appeal. They cannot necessarily file a lien or levy against you, but they may offset a taxpayer’s federal tax refund by the amount of any unpaid taxes.

– For those who are considered to be high-income individuals (those who make over $200,000 per year alone or $250,000 if married and filing jointly), there are a few more provisions to the law that you must be aware of. The law raises the Medicare tax on wages and subjects investment income to a Medicare tax for the first time. This increases the Medicare taxes on their earned income by .9% (on top of the 1.45% Medicare tax that they currently pay on all of their wages), and subjects their investment income to a penalty of up to 3.8% on at least a portion of their capital gains and dividends.

– As a result of the Affordable Care Act, the medical deduction threshold has been raised. You may only deduct medical expenses that exceed 10% of your adjusted gross income (up from 7.5% adjusted gross income). It has also raised the penalty on nonqualified Health Savings Account (HSA) distributions for money spent on something other than qualified medical expenses. Those purchases are now subject to a 20% tax (up from 10%).

Individual Subsidies and Credits:

– Along with penalties, the law also offers subsidies to low- and middle-income families and provides tax credits to most families who sign up for coverage on the state and federal exchanges (through healthcare.gov or your state’s equivalent). This credit can be an advance payment used immediately to lower your monthly premium costs. There are calculators on the internet which help calculate how much your family will receive in subsidies or credits, and we recommend this one https://kff.org/interactive/subsidy-calculator/.

 Employer Mandate Penalty:

–The employer mandate which requires employers with 50 or more full-time workers to provide qualified, affordable health insurance will go into effect in 2015. An employer will have to make a “shared responsibility” payment if it a) does not offer employees and their dependents an employer-sponsored health plan with minimum essential coverage and if any full-time employees qualify for federal insurance subsidies, or b) it offers such a plan but the plan proves too expensive for some employees who otherwise would qualify for federal subsidies. The fees are as follows:

–$2,000 per year for every improperly-insured full-time employee if insurance is not offered
– If at least one employee receives a tax credit because coverage is unaffordable or does not cover 60% of total costs, the employer must pay either $3,000 for each of those employees receiving a credit or $750 for each of their full-time employees, whichever is less.

– Unlike employer contributions to employee premiums, the Employer Shared Responsibility Payment is not tax deductible.

Employer Mandate Credits:
– For 2014-15, the Obamacare tax credit is as much as 50% of the premiums you pay as a for-profit employer and 35% for tax-exempt employers, so long as the insurance was purchased through the state or federal exchange. Through 2015, a company with fewer than 25 full-time employees with an average annual wage less than $50,000 can get a tax credit for a percentage of the health insurance premiums it pays for its workers.

Things to know for 2013 taxes:

– To start, there is only one tax law change for 2013 that could affect taxpayers in all income groups: the change to deductible medical expenses when a taxpayer is itemizing deductions. Only medical expenses that exceed 10 % of your adjusted gross income will be allowed as a deduction. (Taxpayers who are age 65 or older in 2013 still have a medical deduction floor of 7.5 percent.) This change will affect all those who itemize deductions and claim a medical expense deduction so if you typically claim this deduction, you’re going to want to watch for this change.
– The other two changes for 2013 that come from the Affordable Care Act are the two explained above which affect high income taxpayers, the additional 0.9% Medicare tax and the new 3.8% Medicare surtax on Net Investment Income (NII). NII includes investment income such as interest, dividends, capital gains, passive income, and rental or royalty income. The tax is assessed on the smaller of the total NII or excess income greater than the income thresholds.

We hope this clears up your confusion and gives you an idea of what to expect for next year’s tax season, and this year is your best (and healthiest) yet!  Please contact us if you have any more questions regarding the Affordable Care Act.
______________________________________________________________________

Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.

Filed Under: Tax Tips Tagged With: affordable care act, affordable care act taxes, healthcare law taxes, obamacare, obamacare taxes, tax hikes affordable care act, tax hikes obamacare

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