Health Care Reform Taxes

Individual responsibility: Starting in 2014 everyone will be required to maintain health insurance. If you go without insurance, you will be subject to a tax of $695 per year.

Employer responsibility: Large companies will be required to provide health insurance as a benefit to its employees. Companies that do not provide this benefit will be imposed a tax of $2,000 a year per employee.

High cost plan excise tax: Starting in 2018, high cost health insurance plans will be subject to a tax. Plans for single persons that cost in excess of $10,200 and family plans that cost in excess of $27,500 are in this sections cross hairs. The excise tax rate on incremental costs will be 40 percent.

Medicare tax: Medicare tax will now be assessed on investment income for families making in excess of $250,000 and for singles making over $200,000. Investment income includes interest, dividends, capital gains, rental income and royalties. In the past, Medicare taxes had been assessed on wages only. Earn one dollar of investment income while you are over the threshold limits and you will incur this tax. This tax will commence January 1, 2013.

Medicare tax: In addition to the expansion of Medicare tax on investment income as noted in Section 1402 above, the Medicare tax rate has also increased. This tax increases by a third, from 2.9 percent to 3.8 percent.

Brand name pharmaceuticals: Starting in 2011, the pharmaceutical industry will be subject to a $2.5 billion annual excise tax. The annual excise tax increases in subsequent years, rising to $4.2 billion in 2018. The tax is assessed based on a companies market share and is non-deductible for federal tax purposes

Medical Devices: A 2.3 percent excise tax on the sale of medical devices goes into effect on Jan. 1, 2013. That tax, which excludes items sold at retail to consumers, would raise $20 billion through 2019.

Tanning Tax: A 10 percent excise tax on indoor tanning services goes into effect in July 2010.

Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers

Two new tax benefits are now available to employers hiring workers who were previously unemployed or working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act.

Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

“These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead,” said IRS Commissioner Doug Shulman.

The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.
In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.

Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit.

Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010.

House Approves Health Care Bill

The House voted 219-212 in favor of health legislation backed by President Obama. The 219-212 House vote, coming after a tumultuous day of protests and rancorous debate, paves the way for Obama to sign the major portion of his 10-year, $940 billion plan early this week. The vote assured that about 32 million Americans will gain health insurance coverage and millions more will win protections against losing theirs. The legislation will raise taxes, largely on the wealthy, and reduce future Medicare spending by about $500 billion.

"This legislation will lead to healthier lives," House Speaker Nancy Pelosi of California said in the final floor speech before the vote. "This is an American proposal that honors the traditions of our country."

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