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Outline of the Tax Provisions of HR 4872 The Health Care and Education Reconciliation Act

March 26, 2010 12:31 pm / Leave a comment

By Stacie Clifford Kitts, CPA

Okay so earlier this week I talked about the passing of HR 3590 aka the Patient Protection and Affordable Care Act which is now a law known as P.L. 111-148. 

However, the new law was amended yesterday by the passing of HR 4872 aka the Health Care and Education Reconciliation ACT.  This new bill is on its way to the president’s desk for approval.

As the Journal of Accountancy points out, this new bill adds stuff that was not built-in to  the Patient Protection Act.

If you need to get up to speed, you can  check out my previous post which outlines the original tax provision here Outline of Health Care Act – Tax Provisions of HR 3590.

The following is  a list of things that were changed or added.  For a complete analysis, check out the J of A’s article.

  • Premium Assistance Credit – Updated
  • Excise Tax on Uninsured Individuals – Updated
  • Adult Dependent – Updated
  • Excise Tax on High Cost Employer-Sponsored Coverage Updated
  • Medicare Tax on Investment Income ( I thought this one might be of particular interest to taxpayers so I have included the J of A’s analysis here- my take, this provision is likely to tick some folks off)

The Reconciliation Act added a new IRC § 1411 that imposes a tax on individuals equal to 3.8% of the lesser of the individual’s net investment income for the year or the amount the individual’s modified adjusted gross income exceeds a threshold amount. For estates and trusts, the tax equals 3.8% of the lesser of undistributed net investment income or adjusted gross income over the dollar amount at which the highest trust and estate tax bracket begins.

For married individuals filing a joint return and surviving spouses, the threshold amount is $250,000; for married taxpayers filing separately, it is $125,000; and for other individuals it is $200,000.

Net investment income is defined as income from interest, dividends, annuities, royalties and rents, other than such income derived in the ordinary course of a trade or business (however, income from passive activities and from a trade or business of trading in financial instruments or commodities is included in the definition of net investment income).

This provision applies to tax years beginning after Dec. 31, 2012.

  • Economic Substance Doctrine – New

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Here is a calendar of dates related to the Act to know:

Dates to follow  
January 1, 2010 Small Business Tax Credit – For tax Years Beginning on or after 1/1/10
July 1, 2010 Tax on Indoor Tanning Services – For services on or after 7/1/2010
January 1, 2011 Tax on HSA Distributions – For tax years beginning on or after 1/1/2011
January 1, 2011 SIMPLE Cafeteria Plans for Business – For tax years beginning on or after 1/1/11
January 1, 2011 Charitable Hospitals – For payments made on or after 1/1/2011
January 1, 2012 Medicare tax on Investment Income – for tax years beginning on or after 1/1/2012
October 1, 2012 Fees on Health Plans –  Beginning for plan years on or after 10/1/12
January 1, 2013 Medical Care Itemized Deductions Threshold -Beginning on 1/1/13
January 1, 2013 Additional Hospital Insurance Tax on High Income Taxpayers – For tax years beginning on or after 1/1/13
January 1, 2013 Flexible Spending Account – Tax years beginning on or after 1/1/13
January 1, 2014 Premium Assistance Credit – For years beginning on 1/1/14
January 1, 2014 Excise tax on Uninsured Individuals – Tax years beginning on or after 1/1/14,
January 1, 2014 Reporting Requirements – Beginning on 1/1/14
January 1, 2014 Cafeteria Plans – Starting 1/1/14
January 1, 2014 Employer Responsibility – Beginning on 1/1/14
January 1, 2018 Excise Tax on High-Cost Employer Plans – For tax years beginning on or after 1/1/18

IRS Presents: Five New Things to Know About 2009 Taxes

February 17, 2010 7:06 am / Leave a comment

As you get ready to prepare your 2009 tax return, the Internal Revenue Service wants to make sure you have all the details about tax law changes that may impact your tax return.

Here are the top five changes that may show up on your 2009 return.

1. The American Recovery and Reinvestment Act

ARRA provides several tax provisions that affect tax year 2009 individual tax returns due April 15, 2010. The recovery law provides tax incentives for first-time homebuyers, people who purchased new cars, those that made their homes more energy efficient, parents and students paying for college, and people who received unemployment compensation.

2. IRA Deduction Expanded

You may be able to take an IRA deduction if you were covered by a retirement plan and your 2009 modified adjusted gross income is less than $65,000 or $109,000 if you are married filing a joint return.

3. Standard Deduction Increased for Most Taxpayers

The 2009 basic standard deductions all increased. They are:

  • $11,400 for married couples filing a joint return and qualifying widows and widowers
  • $5,700 for singles and married individuals filing separate returns
  • $8,350 for heads of household

Taxpayers can now claim an additional standard deduction based on the state or local sales or excise taxes paid on the purchase of most new motor vehicles purchased after February 16, 2009. You can also increase your standard deduction by the state or local real estate taxes paid during the year or net disaster losses suffered from a federally declared disaster.

4. 2009 Standard Mileage Rates

The standard mileage rates changed for 2009. The standard mileage rates for business use of a vehicle:

  • 55 cents per mile

The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move:

  • 24 cents per mile

The standard mileage rate for using a car to provide services to charitable organizations remains at 14 cents per mile.

5. Kiddie Tax Change

The amount of taxable investment income a child can have without it being subject to tax at the parent’s rate has increased to $1,900 for 2009.

For more information about these and other changes for tax year 2009, visit IRS.gov.
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