Request for Social Security Statement
Social Security Administration as of April 2011 stopped sending earnings statements. In order to get them each year you must request them with Social Security Form 7004. Any errors must be corrected within three years.
| SSA-7004 |
Clarification of 2010 Health Care Bill, Myths and Facts
On March 23, 2010 President Obama signed into law the 2010 Health Care Act. In the months since the Act was signed, various myths have arisen that we wish to address in this month's newsletter.
| Click here to read more of Bob Jennings' article... |
How the 2010 Affordable Care Act affects individual Americans
In 2010 Congress passed the Affordable Care Act, called Obamacare by some, which is just now having major impact on individual Americans. There are four major changes that started in 2013 with several more changes starting in 2014.
2013 Changes affecting all Americans
Starting with their 2013 individual tax return filed in the spring of 2014 most Americans will lose the ability to deduct any medical expenses on their tax returns. President Obama’s bill increased the amount of expenses needed before medical deductions are allowed to 10% of adjusted gross income. As an example, if your family income is $70,000 you would need $7,000 of medical expenses before anything would be deductible, and then only any amounts spent greater than $7,000 would be allowed. For Americans who are 65 or over at the end of the year they are allowed to use the old 7.5% threshold for deductible costs through 2016.
The other change affects those workers utilizing an employer-sponsored fringe benefit called a healthcare flex spending account. These are excellent plans and should be utilized to the full extent possible for most people, but starting with the 2013 year the maximum amount you may set aside for this is $2,500 annually, per person, per employer. This means that a married couple may each defer $2,500 annually and if you work a second job that offers this plan you may defer an additional $2,500. Most Americans do not understand this plan but on $2,500 set aside for a health care FSA the average American will save approximately $800 in federal income, Social Security and Medicare tax as one of the single best tax shelters available today for the average person.
The other change affects those workers utilizing an employer-sponsored fringe benefit called a healthcare flex spending account. These are excellent plans and should be utilized to the full extent possible for most people, but starting with the 2013 year the maximum amount you may set aside for this is $2,500 annually, per person, per employer. This means that a married couple may each defer $2,500 annually and if you work a second job that offers this plan you may defer an additional $2,500. Most Americans do not understand this plan but on $2,500 set aside for a health care FSA the average American will save approximately $800 in federal income, Social Security and Medicare tax as one of the single best tax shelters available today for the average person.
2013 Changes affecting Wealthier Americans
For taxpayers with wage or similar earned income over $200,000 (single) or $250,000 (Married, joint) they will pay an additional Medicare surtax of .9% for every dollar of earnings above this base amount. Lots of planning can be done in advance for this so be sure to talk to our office if this affects you.
For taxpayers with any type of income (not just earned income) higher than the above amounts, they will pay an additional 3.8% unearned income surtax on investment earnings such as interest, dividends, capital gains and other similar items.
Additionally higher income Americans will lose, starting in 2013, their ability to deduct themselves or their children as dependents and will also see most of their itemized deductions disallowed as income increases. Finally higher income Americans will see an increase in the highest income tax bracket to 39.6% and an increase in the capital gains rate to 20%. The loss of the ability to utilize itemized deductions makes it extremely important that individuals with employee business expenses or substantial medical expenses meet with us before the end of the year to determine if any actions need to be taken for your personal return.
For taxpayers with any type of income (not just earned income) higher than the above amounts, they will pay an additional 3.8% unearned income surtax on investment earnings such as interest, dividends, capital gains and other similar items.
Additionally higher income Americans will lose, starting in 2013, their ability to deduct themselves or their children as dependents and will also see most of their itemized deductions disallowed as income increases. Finally higher income Americans will see an increase in the highest income tax bracket to 39.6% and an increase in the capital gains rate to 20%. The loss of the ability to utilize itemized deductions makes it extremely important that individuals with employee business expenses or substantial medical expenses meet with us before the end of the year to determine if any actions need to be taken for your personal return.
2014 Changes affecting all Americans
Unless exempt, all Americans starting January 1, 2014 will be required to have reasonable quality health insurance for themselves and their dependents or pay a penalty in 2014. You are exempt if you already have qualified insurance such as Medicare or employer-provided coverage or meet one of the numerous other exemptions. New insurance exchanges, which open October 1, 2013 will allow all individual Americans to purchase their own health insurance in a price-competitive manner from these government run agencies.
All health insurance will now be guaranteed issue and pre-existing conditions must be covered without a premium increase. In fact the only premium differences allowed will be for age, family size, smoking and geographical area differences.
For individuals who are not able to afford insurance they may be able to qualify for a substantial federal tax credit to be used every month towards the insurance premium. Individuals will qualify for the credit if their costs exceed certain levels and if their income meets certain family size restrictions. We can discuss this with you as needed. The credit in 2014 is based on your 2013 income and if the credit is overestimated you may have to pay some or all of it back when you file your 2014 return in early 2015, so planning is extremely important.
The complexities this law adds to your individual tax return are immense and we are already attending special classes to obtain the most up to date guidance available to help you plan for these changes, avoid the additional taxes and penalties, and plan for the best tax treatment available. If anything in this letter affects you personally please call us for a planning meeting.
All health insurance will now be guaranteed issue and pre-existing conditions must be covered without a premium increase. In fact the only premium differences allowed will be for age, family size, smoking and geographical area differences.
For individuals who are not able to afford insurance they may be able to qualify for a substantial federal tax credit to be used every month towards the insurance premium. Individuals will qualify for the credit if their costs exceed certain levels and if their income meets certain family size restrictions. We can discuss this with you as needed. The credit in 2014 is based on your 2013 income and if the credit is overestimated you may have to pay some or all of it back when you file your 2014 return in early 2015, so planning is extremely important.
The complexities this law adds to your individual tax return are immense and we are already attending special classes to obtain the most up to date guidance available to help you plan for these changes, avoid the additional taxes and penalties, and plan for the best tax treatment available. If anything in this letter affects you personally please call us for a planning meeting.
Copyright © 2019 Frayer & Associates, CPA PC. All Rights Reserved.