Health Care Reform is Also Tax Reform

Did you know that the recent health care reform act includes so many tax law changes that the Congressional Budget Office says the IRS will need $10 billion and 17,000 new employees to enforce its share of the new rules?  It's true!  Here are just a few key tax changes:

●  Starting immediately, certain small businesses with fewer than 10 employees will get a 35% credit for the cost of providing employee health benefits.
●  Starting in 2011, employers will have to report the value of health benefits on Form W-2.
●  The penalty tax for Health Savings Account distributions not used for health care expenses doubles, to 20%.  This will discourage using HSAs for supplemental retirement savings.
●  Starting in 2013, the 7.5% floor for deducting medical and dental expenses climbs to 10% (unless you or your spouse are 65 or older, in which case it remains at 7.5% until 2016).
●  Healthcare flexible spending account contributions are capped at $2,500 per year.
●  Starting in 2014, businesses with more than 50 employees will have to offer health benefits or pay a penalty of $2,000 per employee.

The reconciliation bill that accompanied the act includes one more unwelcome change,  Currently, the Medicare tax is limited to 2.9% of earned income.  The reconciliation bill raises that tax by 0.9% of earned income above $200,000 (individuals) or $250,000 (families).  It also adds a 3.8% "Unearned Income Medicare Contribution" on investment income (interest, dividends, annuities, royalties, capital gains, and rents) for taxpayers with Adjusted Gross Incomes above those same threshholds.  Those new taxes would take effect in 2013.

The complete bill is 1,018 pages long!  So it's going to take some time to analyze.  But we'll pay close attention and keep you informed as details become available.  In the meantime, if you have any questions, be sure to call us at 217-241-4597.

Turbo Tax CEO doesn't trust Turbo Tax to prepare his taxes so why should you?

From the March 15th USA Today interview with Brad Smith CEO of Intuit:

Q: Do you use TurboTax to file your own tax return?

A: I use it every year to help my mom do her taxes and my brother. (I) have situations with trusts and things, (so) I've used someone to help me with my taxes the last couple of years. I do go through my own taxes with TurboTax and compare it (with my accountant's results).

Having a trust should make a difference????

Or perhaps we should ask Treasury Secretary Timothy Geithner.  He blamed his own tax problems on Turbo Tax.  Click here for even more details about whether the software was in fact the problem and not his own. 

In any case shouldn't any taxpayer think twice before filing on its own? 

Are you in danger of being TURBO TAXED?