The Exuberant Accountant - Scott Heintzelman

Sometimes I enjoy getting another professional’s perspective on what is happening in Washington.  Here is a great blog post from the Tax Girl.

Apparently, Congress is on a roll. Just a couple of months after they pushed through the massive health care bill (referred to as the Patient Protection and Affordable Care Act, signed into law in March 2010) and debated the similarly hefty Tax Extenders Bill (referred to as the American Workers, State, and Business Relief Act of 2010, passed by the Senate in March 2010), they’re trying again. Pitched as “amendments to the Senate Amendment to H.R. 4213? (H.R. 4213 is the Tax Extenders Bill), the Senate and the House have apparently reached a consensus on a new bill and it’s causing quite a commotion.

First, the title: American Jobs and Closing Tax Loopholes Act of 2010. Let your mind wander for a minute.

Next, the length. When I plowed through it earlier today, the version was a remarkable 433 pages (the officially summary alone is 27 pages). Yeah, for an amendment.

And finally, the content. Brace yourself. There are nine chapters:

When I look at the huge deficits the US has amassed and continues to run up, I see very few magic bullets.  The Congressional Budget Office currently estimates that we will generate nearly $10 trillion in cumulative budget deficits over the next 10 years.  This is an enormous amount of money and in order to balance our budget (or at least close the gap) it will take more than spending cuts…it will take tax increases.  The question that everyone wants to know is how much additional tax will I have to pay?

Our President made many promises during his campaign regarding tax increases and his desire to “only tax the rich.”  Well, I am not sure that is a solution for increasing long term tax receipts. Check out this chart below.  It shows the actual tax receipts as a percentage of GDP (Gross Domestic Product).  Notice how over the past 70 years we collect approximately 18% of GDP regardless of the tax rates in place.

Many small businesses and tax-exempt organizations that provide health insurance coverage to their employees now qualify for a special tax credit, according to the Internal Revenue Service.

Included in the health care reform legislation, the Patient Protection and Affordable Care Act, approved by Congress and signed by President Obama on March 23, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

"This credit provides a real boost to eligible small businesses by helping them afford health coverage for their employees," said IRS Commissioner Doug Shulman. "We urge small businesses and tax-exempt employers to look closely at this important tax break - which is already effective - to see if they qualify."

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.