Sunday, July 28, 2013

Net Investment Income Tax FAQs, a new TAX to fund health care cost

Net Investment Income Tax FAQs,

The Net Investment income tax is an integral part of the Affordable Care and Patient Protection Act, created a new TAX to fund an expanded health care coverage American marketplace

Net Investment Income Tax FAQs

Basics of the Net Investment Income Tax

1. What is the Net Investment Income Tax (NIIT)?
The Net Investment Income Tax is imposed by section 1411 of the Internal Revenue Code (IRC). The NIIT applies at a rate of 3.8 percent to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts.
2. When does the Net Investment Income Tax take effect?
The Net Investment Income Tax goes into effect on Jan. 1, 2013. The NIIT will affect income tax returns of individuals, estates and trusts for their first tax year beginning on (or after) Jan. 1, 2013. It will not affect income tax returns for the 2012 taxable year that will be filed in 2013.

Who Owes the Net Investment Income Tax

3. What individuals are subject to the Net Investment Income Tax?
Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following thresholds:

Filing Status	Threshold Amount
Married filing jointly	$250,000
Married filing separately	$125,000
Single	$200,000
Head of household (with qualifying person)	$200,000
Qualifying widow(er) with dependent child	$250,000

Taxpayers should be aware that these threshold amounts are not indexed for inflation.
If you are an individual that is exempt from Medicare taxes, you still may be subject to the Net Investment Income Tax if you have Net Investment Income and also have modified adjusted gross income over the applicable thresholds.
4. What individuals are not subject to the Net Investment Income Tax?
Nonresident Aliens (NRAs) are not subject to the Net Investment Income Tax. If an NRA is married to a U.S. citizen or resident and has made, or is planning to make, an election under IRC section 6013(g) to be treated as a resident alien for purposes of filing as Married Filing Jointly, the proposed regulations provide these couples special rules and a corresponding IRC section 6013(g) election for the NIIT.
5. What Estates and Trusts are subject to the Net Investment Income Tax?
Estates and Trusts will be subject to the Net Investment Income Tax if they have undistributed Net Investment Income and also have adjusted gross income over the dollar amount at which the highest tax bracket for an estate or trust begins for such taxable year (for tax year 2012, this threshold amount is $11,650). There are special computational rules for certain unique types of trusts, such a Charitable Remainder Trusts and Electing Small Business Trusts, which can be found in the proposed regulations (see # 19 below).
6. What Trusts are not subject to the Net Investment Income Tax?
The following trusts are not subject to the Net Investment Income Tax:

Trusts that are exempt from income taxes imposed by Subtitle A of the Internal Revenue Code (e.g., charitable trusts and qualified retirement plan trusts exempt from tax under IRC section 501, and Charitable Remainder Trusts exempt from tax under IRC section 664).
A trust in which all of the unexpired interests are devoted to one or more of the purposes described in IRC section 170(c)(2)(B).
Trusts that are classified as “grantor trusts” under IRC sections 671-679.
Trusts that are not classified as “trusts” for federal income tax purposes (e.g., Real Estate Investment Trusts and Common Trust Funds).

What is Included in Net Investment Income

7. What is included in Net Investment Income?
In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities, and businesses that are passive activities to the taxpayer (within the meaning of IRC section 469). To calculate your Net Investment Income, your investment income is reduced by certain expenses properly allocable to the income (see #12 below).
8. What are some common types of income that are not Net Investment Income?
Wages, unemployment compensation; operating income from a nonpassive business, Social Security Benefits, alimony, tax-exempt interest, self-employment income, Alaska Permanent Fund Dividends (see Rev. Rul. 90-56, 1990-2 CB 102) and distributions from certain Qualified Plans (those described in sections 401(a), 403(a), 403(b), 408, 408A, or 457(b)).
9. What kinds of gains are included in Net Investment Income?
To the extent that gains are not otherwise offset by capital losses, the following gains are common examples of items taken into account in computing Net Investment Income:

Gains from the sale of stocks, bonds, and mutual funds.
Capital gain distributions from mutual funds.
Gain from the sale of investment real estate (including gain from the sale of a second home that is not a primary residence).

Gains from the sale of interests in partnerships and S corporations (to the extent you were a passive owner).
10. Does this tax apply to gain on the sale of a personal residence?
The Net Investment Income Tax will not apply to any amount of gain that is excluded from gross income for regular income tax purposes. The pre-existing statutory exclusion in IRC section 121 exempts the first $250,000 ($500,000 in the case of a married couple) of gain recognized on the sale of a principal residence from gross income for regular income tax purposes and, thus, from the NIIT.

Tuesday, July 2, 2013

Implement the ACA in a Careful, Thoughtful Manner-the U. S. Treasury Department

See www.moranlong.com for additional insights and planning suggestions for health care and retirement.

By: Mark J. Mazur, Assistant Secretary for Tax Policy at the U.S. Department of the Treasury, issue date 7/2/2013

Over the past several months, the Administration has been engaging in a dialogue with businesses - many of which already provide health coverage for their workers - about the new employer and insurer reporting requirements under the Affordable Care Act (ACA). We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively. We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so. We have listened to your feedback. And we are taking action.

The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin. This is designed to meet two goals. First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees. Within the next week, we will publish formal guidance describing this transition. Just like the Administration’s effort to turn the initial 21-page application for health insurance into a three-page application, we are working hard to adapt and to be flexible about reporting requirements as we implement the law.

Here is some additional detail. The ACA includes information reporting (under section 6055) by insurers, self-insuring employers, and other parties that provide health coverage. It also requires information reporting (under section 6056) by certain employers with respect to the health coverage offered to their full-time employees. We expect to publish proposed rules implementing these provisions this summer, after a dialogue with stakeholders - including those responsible employers that already provide their full-time work force with coverage far exceeding the minimum employer shared responsibility requirements - in an effort to minimize the reporting, consistent with effective implementation of the law.

Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015. Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.

We recognize that this transition relief will make it impractical to determine which employers owe shared responsibility payments (under section 4980H) for 2014. Accordingly, we are extending this transition relief to the employer shared responsibility payments. These payments will not apply for 2014. Any employer shared responsibility payments will not apply until 2015.

During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage. Also, our actions today do not affect employees’ access to the premium tax credits available under the ACA (nor any other provision of the ACA).

Monday, July 1, 2013

Colorado Health Care Exchange = Connect for Health Colorado CEO’s Update

Connect for Health Colorado CEO’s Update on Health Plan Prices and Competition http://www.connectforhealthco.com/news-events/news/

Patty Fontneau, Executive Director and Chief Executive Officer, Connect for Health Colorado (Colorado's Health Care Exchange created by Federal Law under the Patient Protection and Affordable Care Act).

I wanted to provide an update in response to questions we received about how much health plans will cost when our health insurance marketplace opens in October. The Division of Insurance posted information about preliminary filings and the Colorado Consumer Health Initiative conducted an analysis of those filings. We’re also analyzing the preliminary filings and are encouraged to see a broad range of costs. These monthly costs will be further lowered for many Coloradans by new financial assistance (tax credits) available only through Connect for Health Colorado.

Preliminary filings from health insurance carriers show that monthly premiums for a 21-year-old living in Denver from the majority of carriers will range from $146 to $234 for bronze plans and from $192 to $279 for silver plans, before cost-reductions based on income. Monthly premiums for a 40-year-old living in Denver from the majority of carriers will range from $186 to $299 for bronze plans and from $245 to $357 for silver plans. Bronze plans are the group of health plans for which the carrier will, on average, cover about 60 percent of health care costs and the consumer will pay for about 40 percent of costs. With silver plans the customer will pay less of the average overall health care costs (closer to 30%), but will pay more each month in premium. Connect for Health Colorado also expects to offer health plans at lower and higher costs and with other cost-sharing levels. The health plans are new and include a comprehensive set of benefits, including doctor visits, hospitalizations, maternity care, emergency room care and prescriptions.

We’re also seeing strong competition among carriers. Preliminary filings show that 10 carriers requested approval to provide about 150 health plans for individuals and families through Connect for Health Colorado. They include All Savers Insurance Company (part of UnitedHealthcare), Anthem Blue Cross and Blue Shield, Cigna, Colorado Choice, Colorado HealthOP, Denver Health, Humana, Kaiser Permanente, New Health Ventures and Rocky Mountain Health Plans. Six carriers – Anthem, Colorado Choice, Colorado HealthOP, Kaiser Permanente, Rocky Mountain Health Plans and See Change – requested approval to provide nearly 100 health plans to small employers through our marketplace.

What we’re seeing so far is good news for Colorado consumers. Starting in October, they will be able shop through Connect for Health Colorado and choose from many health insurance carriers at competitive rates. Nearly a half-million Coloradans will be eligible for further cost reductions to make health insurance more affordable.

Please keep in mind that all of this information is preliminary and may change based on review by the Colorado Division of Insurance. The Division of Insurance regulates insurance companies in the state and has started their standard review of the carrier filings. The review and final determination of plans and rates is expected to be completed in late July. Final details about premiums and the types and number of health plans will be known after that. We’ll continue to keep you updated.

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Sunday, June 30, 2013

Health care in retirement probably costs more than you think

See my website www.moranlong.com for additional information on health care costs
and planning for retirement and health care in your retirement years.

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By Michelle Singletary, Washington Post May 17, 2013

When it comes to thinking about how much money we all need to retire comfortably, it gives us a headache. I just need to say that upfront before telling you the latest news, which is sure to scare you even more about retirement.

You probably know that health care is likely to be among your largest expenses. But how much?

In its annual look at medical expenses for retirees, Fidelity Investments said a couple, both 65, retiring in 2013 would probably need $220,000 to cover health-care expenses if the husband lives to 82 and the wife to 85, the average life expectancies.

Oh, and in case you’re thinking, “Why yes, that makes sense if you add in possible nursing-home costs or long-term care expenses” — think again.

The estimate does not include those costs. It applies to retirees with traditional Medicare insurance coverage.

But there’s an upside. The $220,000 is an 8 percent drop from last year’s $240,000 estimate.

“These numbers matter because health-care-related costs will eat up a good portion of one’s savings in retirement, but it seems to be the cost that individuals have the least amount of awareness of,” said Brad Kimler, executive vice president of Fidelity Benefits Consulting.

http://articles.washingtonpost.com/2013-05-17/business/39324671_1_retiree-health-benefits-brad-kimler-future-retirees

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Tax saving thought - consider an HSA, Health Savings account as a mechanism to force savings for health care costs in your retirement years.

Sunday, June 9, 2013

SHIP [Senior Health Insurance Program) - Free information source for all Medicare questions.

SHIP (State Health Insurance Program)

Centura Health LINKS is a full-service benefits counseling program that provides information to seniors about Medicare and other health insurance issues of interest to older adults. Our staff and volunteers counsel people at no charge about Medicare benefits, appeals, Medigap insurance, employer health plans, long term care insurance and Medicaid. They also help sort and file medical claims.

Centura Health LINKS
4200 W. Conejos Place, Suite 200
Denver, CO 80204

Metro Denver: 720-321-8850
Statewide Outside Metro Denver: 1-800-544-9181

Email us: LINKS@Centura.org

In the interest of educating older adults throughout Colorado, we operate a statewide, toll-free hotline 1-800-544-9181. With help from the Colorado Division of Insurance, we strive to give consumers reliable information about the Medicare's gap in coverage. We do not recommend, endorse or promote any insurance company, policy or agent.

I am one of many qualified volunteers who enjoy providing and answering your Medicare questions.