Friday, June 29, 2012

Tax aspects of the new health care lax

The US Supreme Court declared a mandate requiring US citizens and legal residents to maintain minimum essential health insurance coverage, to be a permissible exercise of Congress's taxing powers under the Constitution.

There were only four votes to uphold the requirement as valid under the Commerce Clause.  The majority opinion by Justice Roberts emphasized that folks who don’t want to purchase health insurance can avoid doing so simply by paying the fee imposed by section 5000A of the tax code, whose collection is enforced by the IRS.  Chief Justice Roberts pointed out that the fee may cost considerably less than purchasing a health insurance policy and that the fee is not applicable to people whose income is so low that they are not required to file income tax returns.

Although the individual mandate's "shared responsibility payment" in US Internal Revenue Code Sec. 5000A is labeled a penalty, not a tax, the Court held it is a tax for purposes of determining its constitutionality, and ultimately upheld it as a valid exercise of Congress's power to tax.

The Court held that the individual mandate was within Congress's power under the Constitution's Taxing Clause. The Court concluded that the individual mandate is not a legal command to buy insurance, but rather a tax on the choice to forgo buying insurance.

Friday, June 1, 2012

Outlook for S-Corps.


Democrats want to make upper-incomer owners of S-Corps. pay self-employment tax on their share of profits if 75% (or more) of the corps. gross income is attributable to the services of 3 or fewer shareholders.  This won’t pass in 2012 but will certainly be looked at in 2013 and beyond. 

Tax law writers are willing to accept tax increases that are used to reduce tax rates.  Congress is rumbling about changing the rules related to S-Corps and partnerships with gross receipts > $50 million.
Any changes would only be made as part of a larger overhaul to help lower corporate tax rates. 
This is bad news to the owners of small S corporations.

Stay tuned!!!

Plan for the Unexpected

I received a call on Sept. 13 from a person asking that I call him back quickly as his matter was urgent.  He was worried about missing the ...