The Patient Protection and Affordable Care Act and related Health Care and Education Reconciliation Act (which are referred to as the healthcare legislation) were signed into law in March.  There are a lot of tax changes and filing requirements being phased in over the next several years. Below are some changes taking effect that may be of interest.


Changes in 2011

W-2 Reporting - Employers must report the value of the employer provided insurance on employee's annual W-2 (not including salary reduction amounts contributed to healthcare flexible spending accounts).

HRA/FSA Employer Sponsored Plans - For participants enrolled in an employer sponsored healthcare HRA or FSA current rules allow you to take tax-free withdrawals to pay for non-prescription drugs like pain or allergy relief medications.  Beginning next year this tax-favored treatment will be available only for prescription drugs.

Changes in 2012

1099 Reports - There will be a new Form 1099 reporting requirement for business payments to corporations.  A business that pays $600 or more in a calendar year to a corporation must supply the corporation with a Form 1099 and file a copy with the IRS.  Prior to this most payments by businesses to corporations were exempt from 1099 reporting.  This requirement also extends to payments for property.

Changes in 2013

Additional .9% Medicare Tax on Earned Income - Starting in 2013 an extra .9% Medicare tax will be charged on

• Salary and/or SE income above $200,000 for an unmarried individual
• Combined salary and/or SE income above $250,000 for a married filing joint couple ($125,000 for married filing separately)

Additional 3.8% Medicare Tax on Net Investment Income Collected by High Income Taxpayers and Trusts - The current long term capital gains rate (LTGR) of 15% will increase to 20% as the "Bush tax cuts" expire.  Also starting in 2013, all or part of net investment income, including long term capital gains and dividends collected by high income taxpayers will be subject to a 3.8% "Medicare contribution tax."  Therefore the top federal rate on long term gains and dividends will be 23.8%.

With the United States "recovering" from the deepest recession since the 1930's we expect changes to our income tax laws will continue.  At BSPJ we understand that proactive communication will allow you to plan for these changes as they happen.  Contact Barry Schimler at 678-741-2510 or bschimler@bspj.com to talk with someone who can help bring these and other issues into perspective for your business.