The Exuberant Accountant - Scott Heintzelman

On Sunday the evening the house passed the senate’s health care bill as well as The Reconciliation Act of 2010.  This act is to “fix” the problems with the senate’s health care bill that passed on Christmas Eve.  Most people expect this reconciled bill to be what is signed into law. Below is a summary provided by the Journal of Accountancy of some of the major tax provisions in the Patient Protection and Affordable Care Act:

Extension of benefits to children age 27 and under - The act contains a provision to extend the general exclusion for reimbursements for medical care expenses under an employer-provided accident or health plan to any child of an employee who has not attained age 27 as of the end of the tax year and codifying the economic substance doctrine.

Premium Assistance Credit – This new act provides for refundable tax credits that eligible taxpayers can use to help cover the cost of health insurance premiums for individuals and families who purchase health insurance through a state health benefit exchange (which each state is required to establish).  Under new IRS § 36B, an eligible individual will enroll in a plan offered through an exchange and report his or her income to the exchange. Based on the information provided to the exchange and his or her income, the individual will receive a premium assistance credit. Treasury will pay the premium assistance credit amount directly to the insurance plan in which the individual is enrolled. The individual will then pay to the plan in which he or she is enrolled the dollar difference between the premium tax credit amount and the total premium charged for the plan.

I have not yet written about the health care bill or reform in my blog. The main reason for that is because the issue is such a hot political potato and also because what is actually in the bill keeps changing. It would appear that this week is a huge milestone on whether we get this particular bill signed into law.

I do want to go on record as stating that I support reform. As a business owner, I have seen all too often double digit rate increases in our health insurance. Our country just has to deal with this problem of out of control health care costs. While my friends tell me I have an opinion on everything, this is one subject for which I am not sure I have the answers.

The most recent version of the bill racing through committee appears to be adding numerous new taxes. The one that really caught my eye was the addition of the 2.9% Medicare payroll tax to also include “unearned income.” Everyone that works and receives “active income” pays FICA and Medicare taxes. Those that are employees only pay half (FICA 6.2% and 1.45% Medicare) of the 15.3% and the employer pays the other half. Self-employed people pay both halves of this tax.