New Health Care Reform
Recently, two pieces of legislation, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law. Together, these pieces of legislation make the most significant reform to health care in the United States since the enactment of Medicare. The Congressional Budget Office estimates that by 2019, approximately 32 million currently uninsured Americans will have health insurance, at a cost of about $940 billion. A major component of the reform legislation is the
		creation of state-based American Health Benefit Exchanges and Small Business Health Options Program Exchanges to provide health insurance for low-income individuals and small businesses. The following is a brief description of some of the most important provisions of the health care reform legislation For individuals U.S. citizens and legal residents will be required to have health insurance by 2014, with some exceptions. Those without insurance will face a tax penalty of as much

Please see New Health Care Reform below

Employment Incentives

The recently signed federal Hiring Incentives to Restore Employment (HIRE) Act brings two new tax benefits for employers:

New Hire Tax Credit: provides employers with up to $1,000 for employing a qualified worker for at least 52 consecutive weeks, providing that the employee’s salary does not decrease significantly in the second half of the year. The amount of the credit is the lesser of $1,000 or 6.2% of the employee’s wages. This credit will be claimed on the employer’s 2011 federal tax return.

Payroll Tax Exemption: allows employers to exempt the 6.2% social security tax on wages paid to qualifying employees, effective on wages paid from March 19, 2010 through December 31, 2010. Employees must still pay social security tax, and both employers and employees must still pay Medicare tax.

Qualifying Employees: are individuals who begin employment after February 3, 2010, and before January 1, 2011, who have been unemployed or employed for less than 40 hours during the 60-day period prior to the date that employment begins, and who are not family members of or related in certain ways to the employer. A Qualified Employee must sign form W-11.

Roth IRAs: Annual Contributions: Roth IRAs have been popular since their introduction in 1998, but high-income taxpayers have not been able to participate. Limits on Modified Adjusted Gross Income (MAGI) have been raised for 2010. You can make a full contribution (up to your earned income) of $5,000 (or $6,000 if over 50) if your MAGI does not exceed: Single or Head of Household - $105,000 Married filing jointly - $167,000 Conversions: Starting in 2010, the $100,000 income limit does not apply to Roth conversions, though inherited IRAs still cannot be converted. Deferral of Conversion Tax: When you convert a traditional (deductible) IRA to a Roth IRA, you are taxed as if you received a distribution, though the 10% early distribution tax doesn’t apply, even if you are under 59½. If you made both deductible and non-deductible IRA contributions, the calculation of the tax can be rather complicated. For conversions in 2010 only, you can choose to pay the entire tax in 2010 or choose to pay half with the 2011 tax return and the other half on the 2012 tax return.
	To Convert or not to Convert? And if so, when to pay the tax? The answer rests on your taxable income in 2010 and your expected income in future years. While it is a common principle in economics that it is better to pay $1 next year than today, there is also a good possibility that tax rates will climb. You should also consider how long you expect to keep the money in a Roth before having to draw from it. The longer the investments stay in a Roth the larger the cumulative tax savings.

		Guidance issued on Coverage for Children under 27 Employer-provided reimbursement for the medical care of the employee, and his or her spouse or dependents, is excluded from the employee’s gross income. This exclusion has been extended to employer-provided reimbursements for medical care of the employee’s child who has not attained age 27 by the end of the tax year. The new guidance makes clear that the child of the employee need not be a dependent in order to qualify for this exclusion. This provision is effective 3/10/2010.
2011 Limits on HSAs Released HSAs remain an attractive alternative to traditional coverage. Both individuals and businesses should check its financial advantages against existing policies. For 2011, the Treasury has released the inflation-adjusted limits: The annual deduction limitation for an individual policy with self-only coverage under a high-deductible plan remains $3,050. The annual deduction limitation for an individual with family coverage remains $6,150.
	Expanded 1099 information reporting starting for tax year 2011 As part of the Patient Protection and Affordable Care Act of 3/23/2010, businesses will be required to report payment of over $600 per year of goods or services made to anyone, including corporations, except for entities exempt under 501 (a), which are charities and the like.  This change in information reporting has been discussed for a long time as a means of tracking down more tax cheats, but until now congress had not acted upon it.  The law represents a considerable expansion of information reporting via 1099-MISC; in the past corporations were generally excluded from information reporting; only payment for services (and goods paid for incident to the service) over $600 per year, and goods over of $5000 per year needed to be reported.  The requirement for information reporting starts in 2012.  This start date suggests that your business will need to be gathering reporting information in 2011, so it can be reported on 2012 1099s.  This means that both business and individuals will be asked to fill out, or request the completion, of form W-9 “Request for Taxpayer Identification Number and Certification” starting January, 2011 before issuing any payment of over $600 from anyone.

New Health Care from page 1
as 2.5% of taxable income. Existing employer-sponsored health insurance plans will be allowed to remain essentially the same except the plans will be required to extend dependent coverage to qualifying children through age 26 (see page 4); lifetime limits (and eventually, annual dollar limits) on coverage must be eliminated, waiting periods for coverage cannot extend beyond 90 days, and insurers will not be able to deny coverage or charge higher premiums to people based on their health status and gender. Medicaid eligibility will be expanded to include individuals under age 65 whose income is less than 133% of the Federal Poverty Level. For families with incomes up to 400% of the Federal Poverty Level, tax credits and subsidies will be available to purchase health insurance through state-run exchanges, and to offset out-of-pocket costs. Contributions to a health flexible spending account will be limited to $2,500 per year. Reimbursements from health FSAs and HRAs for over-the-counter drugs will be restricted, and tax-free reimbursements from HSAs and Archer MSAs for over-the-counter drugs will not be allowed, while the tax on HSAs and Archer MSAs increases for distributions not used for qualified medical expenses (effective 1/1/2011). A rebate of $250 will be available to Medicare Part D (drug coverage) beneficiaries who reach the coverage gap (donut hole) and the coinsurance rate for costs within this gap are gradually reduced to 25%. Effective in 2010 Adults with pre-existing conditions will be able to purchase coverage from temporary high-risk pools until 2014, when coverage cannot otherwise be denied for pre-existing conditions. A national program will be established to provide limited reimbursement for long-term care expenses for individuals who participate by contributing to the program's cost through voluntary payroll deductions.

			We’re on the Web! Visit us at: www.meltzercpa.com
	Meltzer & Meltzer CPAs 7900 Old York Road C-2 Elkins Park PA 19027