The Impact of the Health Care Law on Corporate Budgets
How will President Barack Obama’s signature health care reform law (the Patient Protection and Affordable Care Act) impact the budgets of America’s corporations? That is a question that many people in organizations have been trying to answer since the legislation was passed in 2010. The answer is: it’s complicated and it depends on the size of the business. Also, many of the decisions about how the law will be implemented have yet to be made.
Another factor is the upcoming U.S. Supreme Court decision. In the 2011-12 Supreme Court term, the body will hear arguments that some parts of the law are unconstitutional. However, the Court is unlikely to strike down the law as a whole, so some of its provisions will probably still stand.
Larger Businesses: Larger companies with 50 or more employees may experience the law’s biggest impact due to its “pay or play” employer responsibility design where companies will have to determine whether or not they will offer adequate health coverage or pay a penalty. A recent Financial Executives Research Foundation (FERF) study on “Health Care Reform and its Effect on Corporate America” found that while 46 percent of the senior financial executives surveyed expected the law will cause them to make structural changes to their company’s health care benefits, 34 percent did not yet know what the impact would be.
Starting in 2014, large companies will pay a $2,000 penalty for each full-time worker who gets a public subsidy to buy insurance individually. The Congressional Budget Office (CBO) believes that relatively few companies will choose the route of dropping coverage; CBO projects that only 3 million workers will lose their employer-sponsored health care because of the law’s requirements.
In the meantime many large businesses are already feeling the effects of the new law. Companies such as The Boeing Co., Caterpillar Inc. and Deere & Co. have warned that they will take income tax hits of $100 million to $150 million because of the new law.
Larger companies with many low-wage employees will also face substantial changes from the law as they will need to provide acceptable health insurance or face penalties. Already companies such as McDonald’s Corp. have reportedly petitioned the Department of Health and Human Services (HHS) for permission to continue offering the so-called “mini-med” policies, which offer limited benefits that cap at $2,000 a year – to their workers. PPACA’s provisions require that in 2011 companies must offer policies with much higher caps, and the law will phase out these annual dollar limits all together by 2014. But HHS granted permission to more than 1,000 companies to continue offering the mini-meds. While some companies hoped HHS would continue to offer these waivers indefinitely, the Centers for Medicare and Medicaid Services (CMS) this year issued guidance that after Sept. 22, no new applications for these waivers would be considered.
It is unclear what companies with many low-paid workers will do otherwise. Some experts do not believe these companies will find the resources to cover insurance for these employees and worry that larger corporations may reduce their workforces. They may also stop offering insurance altogether, pushing those workers into state health insurance exchanges.
Small Businesses: Because of their size, the new health care law stands to have a more profound influence on small businesses. Many provisions in the law are designed to offset the negative effects and address issues that small businesses currently have with health insurance. The law provides for an exemption from the employer responsibility requirements for those employers with less than 50 employees, meaning that these small businesses will not be penalized for not providing adequate health coverage. Instead, small companies can receive tax credits to offset the cost of paying for employees’ health care. In 2011, the tax credits can be up to 35 percent of the total cost, but the amount rises to 50 percent in 2014. The tax credit is available to companies with fewer than 25 full-time employees who pay an average salary of less than $50,000 annually. In order to benefit from the tax credit, the company must also pay for at least half of its employees’ premiums.
In addition, beginning in 2014, companies with 100 or fewer workers will be able to participate in health insurance exchanges that will pool small businesses’ buying power. CBO projects that these exchanges will create lower administrative costs for the companies and will reduce the cost of premiums by 1 percent to 4 percent. Furthermore, the new law will prohibit insurance companies from raising premiums for employers who have one very sick worker or from refusing insurance to employees with preexisting conditions.
Liliana DeVita is the marketing director for Financial Executives International. Visit the organization’s Financial Reporting blog for information of interest to senior-level financial executives.
15 Year Mortgages vs. 30 Year Mortgages
It can get quite confusing when you want to borrow money for a house, especially when it comes to the length of the loan. Should you go with a 15-year or 30-year? They both have their good and bad qualities, and the main difference is easy to figure out. The 15-year loans have higher monthly payments, but you pay less interest. The 30-year loans have lower monthly payments, but you pay more interest in the end. Seems straightforward, but you should consider some other things like discipline, risk, and retirement before making this decision. Do not make this decision until you have the facts.
When looking at the 15-year loan you need to decide if you can make those high monthly payments. Most 15-year loans have a smaller interest rate, which makes them look like the better deal, but how much will it stretch your pocket book? Another thing to look at involves your savings. Do you have an emergency fund? If something happened and you or your partner could not work, do you have enough saved to hold you over? If not, then maybe you should look at a 30-year loan.
Looking at the 30-year loan, you will have a much lower monthly payment. Some advantages you will see include writing off some of the interest yearly on your taxes, and you could put more money in your retirement fund. You could also invest elsewhere, depending on what kind of risks you want to take. Do you intend on retiring soon? If so then maybe the 15-year loan would work better for you.
You should also look at the possibility of a 30-year loan that you pay off in 15 years. By doubling up on payments, you could pay your loan off early. You would save considerably less on interest, but you would pay a little more than you would with the 15-year loan. If you consider yourself quite disciplined this could work for you. If you did fall on hard times, you could just make your regular lower monthly payment.
Choosing the right lender makes a difference. Do not go with the first one. Talk with several mortgage lenders before you decide. Choose one that makes you feel at ease, and one you trust. They can walk you through the whole process and answer all of your questions. Whether you go with a 15-year loan or a 30-year loan will remain your decision, but sometimes talking with someone helps.
First Alliance Home Mortgage is New Jersey’s premier Mortgage Banker/Broker. Their experienced Loan Officers provide clients with the latest information on special government programs, equity acceleration, and how to choose the type of loan that best suits their needs. http://www.fahmloans.com/
IRS Releases Proposed Regs on PTIN Fees
The Internal Revenue Service today released proposed regulations that would establish a fee for individuals who apply for a preparer tax identification number (PTIN). Proposed regulations that were issued in March would require certain tax return preparers to obtain a PTIN. The IRS is working to finalize those proposed regulations, which are the first of a series of steps planned to increase oversight of federal tax return preparation.
The proposed regulations (REG-139343-08) would establish a fee of $50, payable to the IRS, to cover technology costs, as well as compliance and outreach efforts associated with the new PTIN program. The proposed regulations would also provide for an additional fee (expected to be substantially lower than $50) to be charged by the third-party vendor chosen to operate the new online system.
That fee amount is expected to be announced soon, as well as additional details about the launch of a new online application system. These fees could change in future years as program costs are reevaluated.
Agencies are directed by the Office of Management and Budget (OMB) to charge user fees to recover the cost of services that convey special benefits beyond those available to the general public, such as the authority to prepare federal tax returns for compensation.
Tax professionals and other interested parties have until Aug. 23, 2010, to submit comments regarding the proposed regulations. The official publication date of these proposed regulations is July 23.
In January, IRS Commissioner Doug Shulman announced the results of a comprehensive six-month study of the tax return preparer industry, which proposed new registration, testing, and continuing education of tax return preparers.
With more than 80 percent of American households using a tax preparer or tax software to help them prepare and file their taxes, higher standards for the tax return preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term.
How to Learn More. The IRS recently broadcast the topic “New Requirements for Tax Return Preparers – Learn the Who, What, When and How” on the webinar IRS Live, an educational program for tax professionals. View the archive on IRS.gov.
Tax professionals can also learn more by attending one of six tax forums this summer around the country hosted by the IRS. The IRS Nationwide Tax Forums are three-day events that provide tax professionals with the most up-to-date information on federal and state tax issues. Also for more information see a special page on this web site.
Rizzolo Group has many years experience helping small business owners decrease taxes and improve profitability. You need the right financial data and the right tax preparer who knows accounting bookkeeping, payroll services and gives you timely advice. Rizzolo Group does that!
IRS Realigns LMSB Division
As part of a continuing effort to improve global tax administration efforts, Internal Revenue Service officials announced today the realignment of the Large and Mid-Size Business (LMSB) division to create a more centralized organization dedicated to improving international tax compliance. As part of the organizational shift, the name of the IRS’s large corporate unit — LMSB — will change on Oct. 1 to the Large Business and International division (LB&I).
“Executing our international strategy is a top priority and our work continues to intensify in this area” said IRS Commissioner Doug Shulman. “Every day we are moving forward in our international compliance efforts. Bringing together our top international personnel in this new group will help us advance our global tax administration efforts and ensure focus and fairness in a critical area for our nation.”
The new LB&I organization will enhance the current International program, adding about 875 employees to the existing staff of nearly 600. Most of the additional examiners, economists and technical staff are current employees who specialize on international issues within other parts of LMSB.
The realignment will strengthen international tax compliance for individuals and corporations in several ways, including:
Identifying emerging international compliance issues more quickly.
Removing geographic barriers, allowing for the dedication of IRS experts to the most pressing international issues.
Increasing international specialization among IRS staff by creating economies of scale and improving IRS international coordination.
Ensuring the right compliance resources are allocated to the right cases. Consolidating oversight of international information reporting and implementing new programs, such as the Foreign Account Tax Compliance Act (FATCA).
Coordinating the Competent Authority more closely with field staff that originates cases; especially those dealing with transfer pricing.
Otherwise centralizing and enhancing the IRS’s focus on transfer pricing. Heather C. Maloy will continue serving as Commissioner of LB&I. Michael Danilack, Deputy Commissioner, International, will head the realigned global unit. Paul D. DeNard will continue serving as Deputy Commissioner (Operations). The new international unit will include a transfer pricing director, who will continue piloting the new transfer pricing practice, and a chief economist, who will oversee the IRS’s economic positions pertaining to transfer pricing.
“The realigned organization will let us focus on high-risk international compliance issues and handle these cases with greater consistency and efficiency as we continue to increase our work in this area,” Shulman said.
In addition, the realigned LB&I will continue to serve the same population of taxpayers; corporations, subchapter S corporations and partnerships with assets greater than $10 million as well as certain high wealth individuals.
Today’s announcement marks the latest in a number of efforts the IRS has made to increase international tax compliance. The IRS has taken major steps to address offshore tax evasion, including the investigation of the misuse of undisclosed offshore accounts by U.S. taxpayers. Last fall, the IRS created a Global High Wealth Industry unit to better monitor tax compliance by high income individuals and their related enterprises.
LB&I is also charged with overseeing the implementation of the recently enacted Foreign Account Tax Compliance Act (FATCA). Signed into law in March, FATCA will substantially improve international information reporting, increasing international transparency and compliance.
The IRS and the Department of Treasury have also worked to revise tax treaties and tax information exchange agreements (TIEAs) to.
Rizzolo Group has many years experience helping small business owners decrease taxes and improve profitability. You need the right financial data and the right tax preparer who knows accounting bookkeeping, payroll services and gives you timely advice. Rizzolo Group does that!
IRS Retires Debt Indicator
The Internal Revenue Service today announced that starting with next year’s tax filing season it will no longer provide tax preparers and associated financial institutions with the “debt indicator,” which is used to facilitate refund anticipation loans (RALs).
“As we prepare for tax season every year, we look at past practices and consider whether they still make sense. We no longer see a need for the debt indicator in a world where we can process a tax return and deliver a refund in 10 days,” IRS Commissioner Doug Shulman said. “We encourage taxpayers to use e-file with direct deposit so they can get their refunds in just a few days.”
So far this year, more than 95 million tax returns have been e-filed, representing more than 70 percent of tax returns. “Refund Anticipation Loans are often targeted at lower-income taxpayers,” Shulman said. “With e-file and direct deposit, these taxpayers now have other ways to quickly access their cash.”
The IRS has been reviewing refund settlement products, such as RALs and Refund Anticipation Checks (RACs), as part of the Return Preparer Review released in January. Specifically, the IRS announced that it would study refund settlement products.
RALs are loans secured by a taxpayer’s anticipated tax refund. Currently, tax preparers who electronically submit a client’s tax return receive in the acknowledgment file an indication of whether an individual taxpayer will have any portion of the refund offset for delinquent tax or other debts, such as unpaid child support or delinquent federally funded student loans. This acknowledgment is known as the debt indicator, and is used as an underwriting tool for RALs.
The IRS announcement would remove the debt indicator starting with the upcoming 2011 tax filing season. The IRS noted that taxpayers will continue to have access to information about their tax refunds and any offsets through the “Where’s My Refund?” service on IRS.gov.
RACs are temporary bank accounts established on behalf of a taxpayer into which a direct deposit refund can be received and out of which a bank typically issues a payment to the taxpayer. With both RALs and RACs, tax preparation and product fees are subtracted directly from the refund, and the taxpayer does not make any “out-of-pocket” payments. They are frequently marketed to taxpayers who do not have cash to pay for professional tax preparation services.
In a related effort, the IRS plans to explore the possibility of providing a new tool for the 2012 tax filing season to give taxpayers a mechanism to use an appropriate portion of their tax refund to pay for the services of a professional tax return preparer. The IRS plans to engage with taxpayers, consumer advocates and the tax return preparer community to consider whether providing this option would be a cost-effective way for consumers to pay for tax return preparation services.
Rizzolo Group has many years experience helping small business owners decrease taxes and improve profitability. You need the right financial data and the right tax preparer who knows accounting bookkeeping, payroll services and gives you timely advice. Rizzolo Group does that!