Healthcare Reform Demystified: The Tax and Regulatory Impact of the New Healthcare Law and What You Need to Know! July 28, 2010

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1 Healthcare Reform Demystified: The Tax and Regulatory Impact of the New Healthcare Law and What You Need to Know! July 28, 2010 Dr. Bob Graboyes, NFIB Senior Healthcare Advisor Bill Rys, NFIB Tax Counsel

2 How can you help? Donate today. Whether you are a small business owner yourself, or are a proud supporter of local business any amount will help increase the power of our message. voice

3 Healthcare Reform Demystified: The Tax and Regulatory Impact of the New Healthcare Law and What You Need to Know! Chat Session immediately following

4 Healthcare Reform Demystified Overview Timeline of Tax Changes Small Business Health Insurance Tax Credit Expanded Information on Tax Form 1099 Payroll Changes Medicare Tax Investment Income Small Business Health Insurance Tax

5 Timeline of Tax Changes 2010 Small Business Healthcare Tax Credit. 10% Tanning Salon Tax W 2 Reporting (2011 healthcare payments reported on 2012 W 2). Brand name Drug Tax. HSA and FSA Limits. HSA Penalty 20% for non qualified purchases. CLASS Act enrollment. Cafeteria Plan Safe Harbor Rules.

6 Timeline of Tax Changes 2012 Expanded 1099 Information Reporting (but need to start planning in 2011) % Medical Device Tax. Fewer Deductible Medical Expenses. Medicare Payroll Taxes Increased. Medicare Investment Income Tax.

7 Timeline of Tax Changes 2014 Small Business Health Insurance Tax Premium Credits for Individuals Individual Mandate Employer Mandate % Tax on Cadillac Health Insurance Plans

8 Small Business Health Insurance Tax Credit 35% Maximum tax credit. 50% in %

9 Small Business Health Insurance Tax Credit Step One: Qualify Do you offer insurance? Do you pay at least 50% of the premiums? Do you employ <25 workers? Do you pay less than $50,000 in wages, on average? If you answer yes to all four questions you may qualify for a credit. If so, now, Step Two: Quantify

10 Small Business Health Insurance Tax Credit Must offer insurance & contribute at least 50% of the premium. Family members are not eligible. Multiple businesses complicate the calculation.??%

11 Small Business Health Insurance Tax Credit 50% minimum contribution. 10 employees, $25,000 average wage. 35%

12 Small Business Health Insurance Tax Credit 50% minimum contribution. 15 employees, $25,000 average wage. 23%

13 Small Business Health Insurance Tax Credit 50% minimum contribution 15 employees, $34,000 average wage 11%

14 Small Business Health Insurance Tax Credit 50% minimum contribution. 15 employees, $34,000 average wage. Policy 25% more generous than average. 9%

15 Small Business Health Insurance Tax Credit 50% minimum contribution. 15 employees, $34,000 average wage. Policy 25% more generous than average. 80/week part time. 5%

16 Small Business Health Insurance Tax Credit 50% minimum contribution. 15 employees, $34,000 average wage. Policy 25% more generous than average. 80/week part time, grows in %

17 Small Business Health Insurance Tax Credit 50% minimum contribution 15 employees, $34,000 average wage, Policy 25% more generous than average, 80/week part time, grows in 2014, but only if you change plans [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] 7% [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==] [=($)==]

18 Small Business Health Insurance Tax Credit 50% minimum contribution. 15 employees, $34,000 average wage. Policy 25% more generous than average. 80/week part time, grows in 2014, but only if you change plans, ends in 6 years. 0%

19 Small Business Health Insurance Tax Credit If you qualify for a credit, take it. But Talk to your accountant. Read the IRS documents. Learn more from NFIB.

20 Expanded Information Reporting on Form 1099 Current information reporting requirements a form 1099 MISC must be filed for services provided by an unincorporated business valued at over $600.

21 Expanded Information Reporting on Form 1099 For Example: a restaurant contracts with a sole proprietor plumber to install new sinks in the restaurant. The restaurant owner pays the plumber $1200 for his services. The restaurant owner files a form 1099 Misc with the IRS and gives a copy to the plumber. The form includes the plumbers Taxpayer Identification Number (TIN).

22 Expanded Information Reporting on Form 1099 Expansion of Information Reporting in the PPACA Any services provided by an incorporated business valued at over $600. Any property purchased valued at over $600.

23 Expanded Information Reporting on Form 1099 Example: Restaurant owner hires the same plumber from above to install sinks for $800, but buys the sinks separately at the Home Depot for $800. The restaurant owner continues to report the services provided by the plumber but now must also report the purchase of the sinks.

24 Expanded Information Reporting on Form 1099 Exception beginning in 2011, any transactions involving a payment card (credit or debit) will be reported to the IRS by the payment card company. These transactions do not need to be reported on a 1099.

25 Expanded Information Reporting on Form 1099 This means beginning in 2011, you should consider tracking the manner of payment for regular transactions to prepare for the new requirements beginning in 2012.

26 Expanded Information Reporting on Form 1099 Keep In Mind: The $600 is cumulative transactions, so you need to track the business transacted with a specific vendor for the entire year. Get the vendors TIN if they do not provide a TIN or an inaccurate TIN you must withhold 28% of the contract amount. Get your TIN this goes for you to, so know your TIN. If you don t have a TIN get one otherwise you have to provide your Social Security Number. More rules to come there are many unanswered questions and a lot of guidance to come.

27 Payroll Changes Beginning with the W 2 s issued in 2012, you must report the value of health insurance. The amount is not taxed, just reported.

28 Payroll Changes CLASS Act the CLASS Act is a government supported long term care program. Participating employers (the program is voluntary) must automatically enroll employees, if employees do not wish to participate they must opt out.

29 Payroll Changes Increased Medicare Tax any wages paid over $200,000 for individuals and $250,000 for joint filers will be subject to an additional.9% Medicare tax. Employer s contribution does not increase, only the employee s share.

30 Medicare Investment Income Tax Currently Medicare payroll taxes only apply to wages. PPACA adds a new Medicare tax on certain investment income. 3.8% tax on the lesser of net investment income or the excess of modified adjusted gross income over the threshold amounts.

31 Medicare Investment Income Tax Threshold $200,000 individual filer, $250,000 joint filer. Net Investment Income interest, dividends, annuities, royalties, rents, and net gain on the disposition of property not held in a trade or business.

32 Small Business Health Insurance Tax Annual fee on health insurance providers in the small group and individual market. Larger group plans are exempt. Fee based on the market share of the insurance company, i.e. the more insurance you provide the more tax you pay.

33 Small Business Health Insurance Tax Fee is based on a target annual revenue goes from $8 billion in 2014 to $14.3 billion The tax will be passed on to the customer. One study found that family premiums could increase by $500 because of the tax.

34 NFIB Healthcare Resources For More Information: Includes: Small Business Tax Credit calculator. Healthcare law implementation timeline tax reporting requirements. Unaffordable facts about the new law. Small business health insurance tax, and more

35 How can you help? Donate today. Whether you are a small business owner yourself, or are a proud supporter of local business any amount will help increase the power of our message. voice

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