Succession Planning after ATRA 2012 – Affordable Care Act

Fred M. Whitaker, P.C.'s Tax Planning Legal Blogs

Licensed for 27 years

Attorney in Newport Beach, CA

Fred M. Whitaker, P.C.

Free initial consultation, Credit cards accepted, Fixed hourly rates

Serving Newport Beach, CA

  • Serving Newport Beach, CA

  • Free initial consultation, Credit cards accepted, Fixed hourly rates

Managing Partner at firm Cummins & White, LLP

Serving Newport Beach, CA

Free initial consultation, Credit cards accepted, Fixed hourly rates

Awards AV Preeminent

In this blog post, I will focus on looking at the tax effects of the
Affordable Care Act rather than ATRA 2012.  As most of you know, there
are a tremendous amount of moving parts to the Affordable Care Act. 
There are a few things you should be considering from a tax perspective:

1)    Affordable Care Act Premium Taxes and Fees of 3.8% go into
effect on 1/1/2014 and are added on top of the premium.   You should be
talking to your broker about early renewal being offered to many small
groups for December 1.   If it is lower than the projected premiums on a
2014 renewal, you should consider acting now.  While the tax goes into
effect on 1/1/2014 for everyone, the dollars to pay the tax of course
are a larger number when based on a larger number.  If you can get a
cheaper renewal at the end of 2013, your tax in 2014 will be lower.

2)    Many organizations have sales people and consultants on 1099.
Whether you should be doing that from an employment law perspective is
another discussion for another day.  However, what you need to know is
that on 1/1/2014 – 1099 Contractors may not be included in your group
health plan.  You say no problem – they can just go buy in the exchanges
and I’ll pay them the same amount of money I would have paid for the
premium.  Not so fast!  The IRS just promulgated a ruling that you will
only get the deduction if you include that money as taxable income in
either their 1099 or W-2, but the individual may not take a deduction
for paying the premium charged by the exchange.   So, your participant
just went from a non-taxable benefit to having to pay for the premiums
with after tax dollars.  If you are looking at a relatively modest early
renewal at the end of 2013, you can keep your 1099 contractors on the
plan and delay this tax effect for a year. If you don’t, you will want
to bring these folks in as W-2 employees and or K-1 profits interest
partners to preserve the pre-tax benefit of health insurance.
 
In my next blog post, we’ll look at any tax impacts from any deal to re-open the government and extend the debt ceiling.

In this blog post, I will focus on looking at the tax effects of the
Affordable Care Act rather than ATRA 2012.  As most of you know, there
are a tremendous amount of moving parts to the Affordable Care Act. 
There are a few things you should be considering from a tax perspective:

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