IRS Participation New Healthcare

[Nashville]

I have deferred questions from my clientele about the tax changes coming with the HealthCare legislation passed March 21. I have been telling them "Wait until it passes" before telling them anything. Even if they knew exactly what changes were coming, I don't think it would change their tax planning - mostly all they want to do is complain about it.

The TV tells me that the IRS has been appointed the "Financial Police" for the new Healthcare Bill. "They" will make sure everyone pays their premium, or "They" will do the taxing, or "They" will withhold refunds, etc. Does anyone know any particulars, as I don't think we can rely on the media or political spokesmen to tell us the whole story??

In particular, as a financial society, we can't seem to get some people to pay for anything, not even their taxes, in some cases. How then will the IRS be able to collect for unpaid health insurance premiums? Perhaps my number one question would be "Will the IRS invade the thousands of dollars in refundable credits to finance this health insurance?" I can promise this: if they are not willing to do this, there is no way some people will ever be forced to pay. And note, if they are not willing to do this, the bulk of PAYING for this via taxes will fall on the very wealthy.

If you have any specific and accurate knowledge, please share with us. Also, please respect the wishes of the board and stay on topic without letting the discussion slip into a partisan political donneybrook. We can't separate tax legislation from politics, but we can focus on tax facts and leave the overtones to the hundreds of blogs that are out there.

[RitaB]

Good questions

I agree with your opinions Ron, except I think those of us who are NOT very wealthy will be paying thru the nose for this, too. I hope "they" do invade the refundable credits, but I doubt it.

I know you are looking for answers. I don't have any. All I have been able to come up with has been this: "They" have trouble handling stamps and lines on the road; this can't be good.

OK, I'm done, that sounded like an overtone.

[taxxcpa]

EIC and healthcare

People getting EIC will probably now get free health care in addition the their EIC to be paid by us fat-cats that make a few dollars above the poverty level.

[Dusty2004]

May be good for business

If the IRS is in charge to make sure EVERYONE has coverage that means a lot of people who do not have to file now may have to file in the future to verify coverage.

Dusty

[ChEAr$]

If the IRS is in charge to make sure EVERYONE has coverage that means a lot of people who do not have to file now may have to file in the future to verify coverage.

Dusty

hadn't thought about that aspect of it. I can see it now, publication 17 or pertinant page
of 1040 instructions, section called "Do I have to file a tax return?"

"YES."

[BHoffman]

I'm curious as to whether SCorp pass-thru profits will be subject to the new Medicare tax that will be imposed on dividends?

[Nashville]

Typical Fallout

Yes Beth, and if so, that would sorta defeat the purpose of having an S-corp would it not?

But these and other related questions are waiting in the wings. Also is a testimony as to how your best chosen tax strategy can backfire in a heartbeat, subject to the latest whim or flavor-of-the-month congress.

[JohnH]

I keep reminding clients of your last point whenever they ask about the advisablity of a Roth contribution or conversion. It makes sense at the present time, but who's to say that some future Congress wont' figure out a back-door method to tax Roth accumulations and/or withdrawals? It will be very tempting since it would be such a rich source of revenue.


I definitely think the S-corp is becoming less and less attractive. We already have the problem with the wierd treatment of S-Corp benefits for over-2% shareholders. Then there's the risk associated with the penalty for late-filed S-Corp returns even when there's no tax due. Making the income subject to Medicare tax may just be another nail in the coffin for the S-corp.

[PIGLEE]

Already getting phone calls, how much will my paycheck change because of this bill? How soon will I get this free health care? How does it affect me?

I DON'T KNOW.................... NO ONE KNOWS........................NO ONE HAS READ THE BILL...................... AND THEN THERE IS INTERPRETATION OF THE LAW WHICH WILL TAKE YEARS.

MORE FUN AHEAD, RIGHT???

[taxxcpa]

Medicare tax

If only the medicare portion is subject to tax on money otherwise exempt from social security, it would not be as bad as if none of the profit could escape social security.
Avoiding social security is a big advantage to S-corps earnings that do not greatly exceed the SS maximum. If you can claim $50,000 as non-SS income and pay yourself $ 60,000 salary, then you save a lot on SS.

If your S-Corp earns $500,000 or more, however, it would be hard to escape anything except part of the medicare tax.

[AZ-Tax]

Wouldn't that create more clients for us?

If the IRS is in charge to make sure EVERYONE has coverage that means a lot of people who do not have to file now may have to file in the future to verify coverage.

Dusty

The IRS is now going to impose testing to all paid preparers which most likely will chase some preparers out from being tax preparers + the newly passed health care bill will add additional work to most if not all tax returns + the newly passed health care bill will probably mandate virtually everyone over a certain age, regardless of income, to file a tax return.

I'm I correct to say this sounds positive for our future practice?

[BOB W]

The IRS is now going to impose testing to all paid preparers which most likely will chase some preparers out from being tax preparers + the newly passed health care bill will add additional work to most if not all tax returns + the newly passed health care bill will probably mandate virtually everyone over a certain age, regardless of income, to file a tax return.

I'm I correct to say this sounds positive for our future practice?

I don't know if I want all those little returns?????.......

[veritas]

More info on the Healthcare bill

http://cnsnews.com/news/article/63181

We are going to be charging more as more information is required.