Tag: Health care


Don’t Miss Out on the Small Business Health-Care Tax Credit

Sanjiv Gupta CPA - 9 years ago
I am sure you won’t mind taking some more business tax credits.   Here is another tax credit, if you are a small business employer with less than 25 employees who are earning an average wage of less than $50,000 a year and you pay at least 50% of the employee’s insurance premiums.This tax credit is targeted towards tax-exempt organizations and small businesses.  This credit allows small business owners to offer health insurance for the first time.Here is the scope of health insurance tax credit:You take this credit as part of the general business credit.  You can use the form 3800 and any unused general Business Credit would be included with the tax return.  This unused credit can be carried back one year and then forward for up to 20 years. You must have less than 25 full-time employees.  The number of employees is calculated by calculating total number of hours and the total number of employees.The average annual wage should also be less than $50,000.  Once again, this is calculated based upon FICA wages and the total number of full-time employees.The tax credit is for Small Business Owners or Tax-Exempt Organization.Businesses who can’t take credit for 2011 may be eligible to take advantage in future years.  Small employers can claim this credit between 2010 to 2015.Now the question you are waiting for, How much tax credit?The maximum credit for small business employers is 35% of premiums paid.  For tax-exempt employers, the maximum tax credit is 25% of premium paid.Want more good news?Beginning in the year 2014, the tax credit will go up to 50% of premiums paid and 35% for tax-exempt organizations.Please note tax credit is on the amount you pay for health care premiums.  Credit is not on employee-paid premiums.   With up to 50% tax credit, I am sure you would love to offer healthcare for your employees.Want to take credit this year? Call our office for an appointment.

Discounted Kaiser Insurance for Small Business Owners

Sanjiv Gupta CPA - 8 years ago
Our public accounting firm is focused on Small Business Owners and Individuals and many times new business owners ask us about health insurance.   Most of us live in the Bay Area and prefer  “Kaiser” as a  health care provider and therefore I gathered some basic information about Kaiser health care plans for small business owners.Kaiser offers many health care plans but one that suits the need of small business owners is called “GROUP POLICY”.  You can buy this group policy in two flavors.  One with the annual deductible and one with no annual deductible.Plan with annual deductibles cost about $250-$300 less than the non-deductible plans. Both policies cover doctor's visits and other services offered by Kaiser.  Both plans have minimum out of pocket doctor’s visit cost but the key difference is that with an annual deductible plan you have to pay the minimum deductible ($1500) before your major benefits kick in.   For example, a daily rate for the hospital room maybe $500/night and you will have to pay for 3 nights before your insurance pays.  However, with non-deductible plans you won’t be required to pay for these three days.So, if you and your employees are fairly healthy and won’t be needing any major services than you can opt for deductible plan and save a significant amount on a monthly basis.How about Spouse and kids?Yes, of course, your employees along with officers/owners of the company can also enroll their dependents including kids and spouses.  Most policies don’t allow you to include your parents.What are the requirements for this kind of policy?You must have a business in good standing.You must have two or more people enrolling in the policy.More than 50% of all eligible persons should have insurance.Can I get a tax deduction for the health policy?You can read my post about health care policy deduction for more details.How much does the policy cost?I found the group policy of very good value. Rate varies by age but here is a simple example. Females less than 30 years old can get this kind of policy for about $300.  Not Bad?How can I enroll in group policy?Simply call Kaiser and ask for enrolling in group policy.

What You Must Know About 2012 Tax Challenges

Sanjiv Gupta CPA - 9 years ago
What You Must Know About 2012 Tax Challenges2012 presidential election summons the close of all tax benefits introduced by George Bush. This would usher in an unavoidable clash because of the new tax rules, many deductions, and unchanged tax rates.It is indeed tough to prepare a perfect tax return sheet amidst changing rules and implementation of stringent penalties. Therefore in this article, we are to take a look at how to tackle the most common filing challengesNewly implemented Capital profit rulesWorried about how to calculate taxes on your invested income this year? Heres the key rule: bought stocks after Jan 1, 2011, then you are not eligible to count your cost basis or the tax-exempt investment amount. Your broker will help you calculate the amount as per your preferred method. Most brokers send notice of FIFO; First-in and First-out which reports your selling off older shares. Before filing or tax return analyze 1099 and ask your broker to mend all errors. Talking about 1099, Roman Ciosek, a wealth management assistant at HighTower’s Strata is advising customers to slow down in their tax filing process. According to Ciosek, there will be a number of amendments on the 1099s. However, if you have sold your earlier shares whether willingly or because your broker advised you then you cannot alter your cost-basis.$1billion in unclaimed tax refundsApart from what is discussed above, everything more or less remains in place. You can jolly well counterbalance your gains with losses. While doing so first take into account the long term (considered over a year) profits on assets that incurred tax at or over 15% and balance them with your long term losses; then balance short term gains taxed as minimum income with short term losses. Having calculated the long term accounts and the short term income separately, now you are required to match your long term records to the short term report.  If your loss margin is high considering deducting a little near to $3000 from your income. This way you will be able to manage all taxable amount the next year as well.How to plan: when you proceed with tax filing you can choose to toggle between accounting ways. Your common options are “last-in”, “first-out” & “Specific share identification”.Before using FIFO it is a better idea to select particular stocks/shares that you want to sell. This is more appropriate when you have pitched in at over-time stock selling program and have derived your biggest profit out of the initial batch. On the other hand, if you have a great many capital losses with which you can counterbalance your capital profits then 2012 is a good year to enjoy a good number of tax benefits.This calculation will be the same when accounting for mutual funds, dividend reinvestment plans, exchange-traded funds, and 2013 bonds. If you haven’t received any mails yet from your broker’s company, then wait till you get your options to choose a particular method of calculating your tax amount. Don’t treat the paperwork casually.Retirement plansFiling challenge: If you have plans to finance Roth IRA for 2011, then better have it done before April 17, 2012. IRA is a tax-deductible scheme that will provide you a tax concession on your investment but will calculate taxes on withdrawal of money from this traditional plan. Roth requires you/other liable people to pay upfront taxes. This is one reason why Roth is considered a good investment idea for the long-term by most tax-payers.The changes were introduced in 2010 that everyone could convert their IRA to Roth irrespective of income group. This is indeed facilitating unless you have an exorbitant tax bill. However to calculate tax-return for 2012 you have to abide by the conversions introduced in 2011.IRS warns of ‘dirty dozen’ tax scamsTo tide over your 2010 tax payments if it took you two years then you are required to clear all due amounts this filing season 2012. The time is ticking already and you have only until the filing day to undo 2011 alterations.How to plan: open or reinvest in IRA for 2012 and also transfer an existing IRA into Roth. Such conversion will help you trim down a higher tax rate during your retirement days (than what you have to pay now). For those that were planning to go ahead with conversion plans, this is the right time to take the call. If the conversion is done before the Bush tax laws expire then you won’t be required to pay more than 35% on the upturn, which by the year-end can go up much higher than what is anticipated.Home selling: Not a very good ideaFiling challenge: If you are happy to have earned much after selling off your house then wait, your profit might as well come under taxable charges. For single home sellers, anything above $250,000 will be taxable. For married couples, the same rule applies to a marginal amount of $500,000.Wondering what happens if you sell your house at an under-rated price? You will be considered unlucky, simply because you can’t file for tax-return on the initial amount/cost of your residence. However, if you lent your house out on a mortgage and the contract period was cut short by reconstruction/ restoration purpose then you might as well get a tax break. Such deals are also applicable to conditions such as a short-notice sale or when losing your home to foreclosure. This type of tax-breaks means liberation from paying due debts.Should you buy a home in 2012?How to plan: This tax-break plan closes this year 2012. So in case you want a tax break, then better not waste time.Education tax cutsFiling challenge: the American government though has been lenient with educational grants; however some important scholarships scheme as tax-cut loans. Sorting these educational tax cuts is difficult. Some of the variety of schemes is the lifetime learning credit taxable over $2,000 per return, the American opportunity credit tax-free till $2,500 per undergraduate student, the tuition and fees deduction $4,000 max for a single student per family. However, you can only file one application for the education tax cut per year.Get help to solve your tax doubtsAccording to Justine Ransome, a national tax officer at Grant Thornton the American opportunity credit is the biggest money saver scheme. Taxes are sorted as per income brackets/slabs; but American Opportunity Credit provides the highest tax-cut, $180,000 for married couples and half the amount for singles.How to plan: Bad luck the American opportunity credit expires this year but well you will have various simpler choices the following year.Health care write-offsFiling challenge: health care costs will be deductible at higher rates. This means that you can file for only those that surpass 7.5% of your Adjusted Gross Income. But it seems likely that increasing medical costs can wrap the matter neat and tidy. Allison Shipley, PricewaterhouseCoopers’ principal of personal financial services opines that if a person’s income is drastically reduced and the medical expenses increase on the other hand, then the individual can produce all medical expense bills and enjoy tax-cuts.It’s saving time:Heres what the tax-cut expenses include: general physician and dentist’s bills, doctor's prescription, medications, specs, hearing kits, wheel-chairs, patient’s transportation, consultation fees, caregiver charges, and a few insurance costs.

Obama's Health Care Plan and Tax Deductions

Sanjiv Gupta CPA - 8 years ago
As many of you may know that starting 2014 Obama’s healthcare plan will kick in that may allow low-income families to enroll in a qualified health care plan and claim the insurance premium as a tax credit.  However, some of us are still wondering what if a qualified health plan offered by Obama's health care plan is cheaper than the one offered by our employer.    Can we switch to a different plan?  If we make the switch, can we still deduct premium?Answers to these questions are equally important to the employers.   Employers would like to predict their exposure to the employer responsibility excise imposed should if they offer the healthcare that does not provide minimum value (What is the minimum value?), or is unaffordable.   After all, employers want to know if they should continue with their health plans or not?“Have IRS not finalized the rules?” you may ask.  You can read T.D. 9590 published by the IRS and Treasury Department.  You will find many rules to determine eligibility for and calculation of the tax Code section 36B refundable health insurance premium tax credit added by the Patient Protection and Affordable Care Act, as amended.   These rules address many matter e.g treatment of required waiting periods or relief from erroneous automatic enrollment in an employer-sponsored plan.  But at the same time, they leave many issues for future guidance and public interpretation.For example, Employers can find out when employer plan coverage is affordable for the employee by using a simple formula (i.e., the employee’s contribution is no more than 9.5% of household income) but do not address whether coverage is affordable for related individuals who can enroll in the employer plan.Many groups are working closely with IRS and Obama’s administration to finalize the rules and calculation methods to determine how much premium should be deductible.  Taxpayers are also being invited by the IRS to comment on these matters.Would you like to share your thoughts on this matter?

Tax Breaks for Health Insurance

Sanjiv Gupta CPA - 8 years ago
Health insurance is one of the largest costs that most people deal with on a monthly basis other than the mortgage. Health insurance for those who are self-employed is normally higher than those who have employers offset health insurance. Luckily, there is a tax break for those who are experiencing large health insurance payments.To qualify for the IRS health care tax deductions for you and your family you must be either a self-employed individual with a net profit, have a self-employed partner who qualifies or is a shareholder with more than a 2 percent stock in an S corporation.The insurance plan must be established under your name or the name of your qualifying partner. For the self-employed, this can be your personal name as long as this is the name the business is run under. The self-employed individual or the stockholders must be the one who is paying the health insurance premium for this credit to apply.Stockholders must have the health insurance plan in their name or be reimbursed by the business for health costs to be eligible. This must be verifiable via W-2. To qualify for the tax credit, you must use the Schedule C or 1040 form to apply for the credit.This tax credit can be a large offset for those who are self-employed, as health insurance costs can equal up to a large amount of self-employed income each year. Self-employed persons also pay a higher tax rate than those with an employer so this credit can decrease the tax amount in an effective manner.

President Obama Has Been A Boon For Entrepreneurs And Small Businesses.

Sanjiv Gupta CPA - 7 years ago
The health care plan issued by President Obama has been a boon for entrepreneurs and small businesses. This Affordable Care Act gives these small businesses a lot of support and helps for buying health insurance. Venture capitalists see this as a massive opportunity and they have been giving away lots of cash benefits for starting up health care centers across the US.The investments made in health care setups grew at a whopping 64% in the first quarter of 2013 which is way higher than investments last year.  Brad Weinberg, a partner at Blueprint Health and venture capitalists for new health care setups suggests that this is the best time for entrepreneurs for setting up health centers as all infrastructure is available like interest, support, and capital.  Blueprint has been helping around 30 companies with $20,000 each for setting up health care centers for a stake of 6% in equity.Health care was never the most sought after industry in the US as a technology was the booming sector. Even IT companies were more focused on social networking or game centers. However, the Affordable Care Act turned everybody’s focus on the health care industry, due to the huge financial incentives that it provided. There are more opportunities to set up newer units and speedily resolve many health problems.Attractive financial incentives accompany the Affordable Care act. These are offered to health care providers to upgrade their medical equipment to newer models and the patients are encouraged to stay healthy always. People who work with the new startups have stated out of their experience, that the hospitals and insurance companies always look up to entrepreneurs for their innovative technologies. New startups are given huge aids to come up with new and cheap techniques to make healthcare a booming industry.David Whitlinger, executive director of the New York eHealth Collaborative announced recently that the list of venture capitalists and health care providers that have registered with them is more than what they can deal with.  Whitlinger runs a digital health accelerator program that had graduated its initial set of startups recently.  This initiative selects a list of startups that have the potential to help New York’s medical program that finds dozens and dozens of venture capitals who are interested in investing in these setups.Insurance leaders, medical centers and medical shops have gone on record to offer huge discounts and financial assistance for health startups that solve their problems. This has encouraged these small businesses and entrepreneurs to come out with new models and help the people in reducing their hospital visits. These entrepreneurs have found the able support of venture capitalists, who offer them the much-needed capital and support to set up their establishment. This is a mutually beneficial plan of the Affordable Care Act where the venture capitalists get a stake of equity of the fresh startups and these new businesses get the backing of established venture capitalists and enough capital to start working.

Obama Care Explained in Plain English

Sanjiv Gupta CPA - 7 years ago
The US President, Barack Obama and Congress signed an agreement in the year 2010 to bring Obamacare into practice. This is a health insurance scheme initiated by the President so that all the US citizens are covered. The medical costs are on an uptrend in recent years and average medical expenses run into thousands of dollars. In a bid to reduce these costs and make the citizens feel covered in case of medical emergencies, the Obamacare plan was launched.Once a family is covered with the general health insurance, then it need not worry about the shooting medical expenses in case of hospital visits, as a majority of the expenses are covered under this scheme. The patient only needs to pay a very nominal amount during the first visit to the hospital. This is called a co-payment. Most of the employees provide this scheme to their employees in return for a reasonable monthly premium payment.However, Obamacare gives additional benefits to families who already have this scheme and it also provides coverage for people who are so poor that they cannot afford even the minimum premium payments. There are lots of daily wage workers in the US, whose employers do not offer any health insurance schemes to cover them. Obamacare is a panacea for all.Changes that are reflected alreadyPeople who have health insurance get additional benefits from Obamacare in various ways. Parents can get additional coverage for their kids, till the kids turn 26 years of age. This plan does not drop patients midway or remove the coverage if somebody in the family falls ill suddenly. Insurance companies, under Obamacare policy, can never refuse to cover for families that have a chronically sick member. The co-payment option is taken off from this system and most of the general check and pregnancy tests can be done free of cost.Insurance companies cannot act fraudulently and can raise premiums during the term of the policy, only if the increase rates are allowed by the state government. According to this policy, the insurance companies should use 80% of the premiums they receive, for settling claims of the insured people. However, if they fail to do it and instead spend on advertising expenses, they have to send a check to the insured for the excess amount used up. Families that do not have any insurance can use Obamacare to get temporary insurance cover till the year 2014.Important changes in futureObamacare will make health insurance compulsory in the year 2013. Failure to take insurance will attract a fine of 2.5% of the annual income to be paid to the government. Insurance schemes can be easily purchased online. Small business employers will have to mandatorily buy health insurance, failing which, they have to cough up a fine of $2000 per employee, except for the first set of 30 employees who joined the company.

New York Times gets so - called “Cadillac Tax” wrong

Sanjiv Gupta CPA - 7 years ago
Healthcare-Now! is an online portal that specializes in the health schemes of the US and helps the people to understand the schemes better and ways to access the same. Recently it clarified a mistake that was done by the New York Times about the coverage and purpose of the Cadillac Tax. Healthcare-Now! explained the right concepts and insisted that the article by the New York Times was clearly misleading to the general public.They insisted that thought the publication was right about the perils of this tax, it had gone wrong about who can use this tax and how the employers are looking out for ways to evade the same.  The tax was incorrectly said to punish the employers who provided high-end health welfare plans to their workers. However, in reality, the tax actually punishes plans that have huge premium charges. ($10,200 for individuals and $27,500 for families).It was also found out that the coverage of the insurance plans had no relation to their premium amounts, which means that plans with high premiums do not necessarily offer wide coverage and plans with low premium do not necessarily offer a small coverage. Recent studies reveal that only 3.7% of the entire premium differences could be related to the difference in coverage. This tax would not give any impact for people, who already have a good coverage, but this could affect older patients who might be required to pay up to three times the premium amounts of what the younger patients pay and it could also mean more premiums to pay for people who live in states that have expensive health care.The Times had explained that this tax would encourage employers to lower their employees’ premium costs through various health and wellness centers to monitor the employees’ health. However, lots of research was done on this subject lately and it was found out these health centers only act as a tool through which the employers transfer costs onto workers with lifelong illnesses. These employees are either exorbitant rates of premium or their benefits are withheld.Healthcare-Now insists that a single-payer tax system is a better way to reduce healthcare costs as it would take off the burden of huge costs from the employer’s shoulders and ensures that all employees get reasonable coverage for their premiums. A publication as reputed as the New York Times should act more socially responsible and stop publishing wrong information about the Cadillac Tax as millions of people get misled due to this.Hence, this portal requests and encourages the readers to submit a short 150-page letter to the editor of the New York Times explaining about any recent article and requesting them to change their stand on the Cadillac Tax. People who are interested and write to the editor must mention their names, addresses and phone numbers so that it is easy for tracing. A huge collective effort like this would surely stop people from misinterpreting the properties of the Cadillac tax.

Health Insurance Deduction

Sanjiv Gupta CPA - 6 years ago
A tax deduction is a big concern, and on the other hand, it is highly beneficial because it can help you in various ways. Health insurance is one of the most crucial things that you can consider in your life. And although you may compromise on many things in life, health insurance is surely something where you don’t want to take a chance. This becomes more important when you know that tax deduction can considerably help you pay for health insurance.The Internal Revenue Service or IRS provides various kinds of deductions for medical expenditures. There are some itemized reductions. Thus, you can make claims for standard deductions. Again some medical deductions are over-the-line exemptions and so all these can be claimed in addition to the standard deductions. With regard to healthcare tax deductions, three options as mentioned below can be chosen. In case you find that your expenditure crosses 7.5 percent of the adjusted gross earnings, then you could take an itemized reduction where your expenses surpass the brink. By qualifying medical expenses, you could consider medical, vision or dental care for your own self, your spouse or any individual dependant on you. Medical services include the ones that would prevent problems that could arise in the future, solve present problems or reduce pains. Medical drugs that need a prescription can be deductible. Further, expenses that you may incur in due course of traveling to the hospital in the form of parking fees, mileage, tolls can also be included.In order to save for future medical expenditures, health savings accounts are sheltered by the tax. However, in order to be eligible for this, you also need to possess a health insurance plan which has a high deductible. Every year, your contribution can go up to a limit set on the basis of the fact as to whether the health insurance plan is just meant for you or also includes your family.Health insurance deduction can also be seen when you are self-employed. If you are in a partnership or you are the owner of greater than 2% of a corporation, you would be able to deduct the price of your health insurance policy and also that of your spouse and any other individual dependant on you. But if you have to qualify for the deductions, your policy should be in your name, that is, the name of the self-employed person, business or partnership. In this deduction, qualified long-term care premiums can be included. But again, there is a limit to the deductible amount because the age of the insured plays an important role in this. This deduction would affect your income tax. But as far as the decrease of your tax liability is concerned, this deduction would not be of any help. As a self-employed individual, you could deduct health insurance premiums from federal income taxes. As a taxpayer, you would be offered huge exemptions that could bring down the taxable income and thus lower the total amount that you would pay in federal income tax.In order to understand more about tax deduction and the way it helps health insurance, you should have a clear idea about the following.If there is a group health insurance provided through an employer then the tax exemption can be enjoyed. In such a scenario, probably your employer is paying the premiums of your insurance from your gross income before holding back federal tax income. This way your yearly tax income comes down and thus you will have a reduced tax bracket. In case your employer is not offering health insurance, you should ideally buy an individual health insurance policy from a private insurance organization. This might also be the case if you prefer to have a completely different coverage plan other than what is available. But again in order to avail tax deductions on health insurance in this regard, you need to note that you will only be able to deduct your private health insurance premiums on your federal income taxes if they are greater than 7.5 percent of your adjusted gross earningsA tax deduction can also be seen in long term health care. The number of adults who need long term health care is on a sharp rise. With the constant increase in health care expenditure, it seems that every single year, insurance coverage is getting lesser with respect to the total expenses for health care. Here, if you can comply with certain qualifications, then you can deduct the cost of long term health care on the returns of your income tax. There are certain long term medical care expenses that are deductible. These include the costs incurred for diagnosis, medical treatment, healing and preventing an ailment. Certain drugs that need a prescription are also deductible. With respect to long term medical care, the expenses include the cost incurred on nurses or certain care facilities on a long term basis, provided these have been prescribed specifically by a doctor. Health insurance payments can be deducted by you in the total expense, but again you would not be allowed to take health insurance deduction pertaining to life and disability.While availing the benefits that tax deductions can do to health insurance, you need to make a note that all deductions should be the expenses paid during the year of tax filing from January 1 to December 31. In case you are mailing a payment on the last day of a year, that is the 31st of December then it will surely be considered to be the expenditure for that particular calendar year.

Everything Everyone Must Know About Medicare

Sanjiv Gupta CPA - 3 years ago
Medicare is the single-payer and social insurance health policy program in the national setting that is administered by the federal government. This has been around since 1966. It is also currently using 30 to 50 privately owned insurance companies all over the United States and is also under contract in the administration.Medicare in the US is funded by payroll taxes, surtaxes, and premiums from the beneficiaries as well as the general revenue. It also provides health insurance for Americans who are also over the age of 65 and are 65 years old, as long as they have worked and paid the system through the deductions in their payroll in the form of taxes. Medicare also offers health insurance to the young generation who have disability status as long as it is determined by the SSA or the Social Security Administration. They also consider the individuals who are suffering from the end stages of renal diseases as well as the end stages of amyotrophic lateral sclerosis.On average, the health policy Medicare covers half of the health care plan policies and charges for those who have been enrolled. These enrollees and participants must also cover the remaining costs using their supplemental insurance or their separate insurance. There are others who even get the payments fresh from their pockets. These costs also vary and depend on the total of the health care policy that the enrollee from the Medicare needs. There might also be costs of the services that have been uncovered. For example, for the long-term policies, these include the hearing, dental as well as vision care. These also include insurance premiums that are supplemental.It is important to know that Medicare has four Parts. Part A covers hospice and hospital services and costs. Part B covers the costs for outpatient services. Part D is the portion that covers the prescription drugs that are self-administered. Part C serves as the alternative to all the other parts that are allowed to experiment with structured plans that are set up differently which also reduces the costs to the government. This lets patients decide which plans to choose and they usually opt for one that has the most benefits.History of Medicare Medicare has always been known as Medicare. This was the original name given to the program that has provided medical care for different families of the people who were serving in the military. They were part of the military and members of the Dependent’s Medical Care Act. This was passed in Congress in 1956. It was President Eisenhower who held the very first White House Conference on the topic of Aging. This was in January 1961. This was also the time when the program for health care that would provide social security benefits was proposed. In July 1965, when Lyndon Johnson was the president, Congress has enacted under the benefits of Medicare as stated in Title XVIII and stated in the Social Security Act. It also provided the health insurance coverage and policies to individuals aged 65 and even older, no matter how much they earn and their medical history. Johnson then signed the bill and it became a law on July 30, 1965. This was done at the Presidential Library named after Harry S. Truman in Independence, Missouri. The first recipients of the said program were Former President Truman along with his wife, the former First Lady named Bess Truman.Before Medicare was created, around 60% of individuals who were over the age of 65 had access to health insurance. The coverage, unfortunately, was often unaffordable and unavailable to most, simply because the older individuals paid more than thrice as much for the younger people who had health insurance. Many of this younger group have become eligible for both Medicaid and Medicare because the law was passed and this gave them the benefit.In 1966 Medicare combatted the racial integration of many people who were in the waiting room. They also promoted desegregation in hospital floors as well as physician practices and made sure that any race is equal whenever they made payments to their health care issuers and providers.Medicare has been operating for almost half a century and it has gone through several changes. For example, since 1965, the provisions of Medicare have already expanded and included benefits for physical, chiropractic therapy and speech in 1972. Medicare also added the beneficiaries to opt and pay for health maintenance in the 1980s. Through the years, Congress has already expanded the Medicare eligibility to younger individuals who have been diagnosed with permanent disabilities and also received the SSDI or the Social Security Disability Insurance payments. Those who have also been diagnosed with ESRD or end-stage renal disease are also eligible for this.In the 1980s, the association of Medicare with HMOs has begun and it was formalized under the presidency of Bill Clinton. It started in 1997 in the form of Part C of Medicare. In 2003, under the presidency of George W Bush, the program under Medicare that covered almost every drug was submitted to the congress and was passed as the bill. It was also taken in effect in Part D of Medicare.In the year of 1982, the government has also added the benefits to hospice in order to assist the elder policyholders but only on a temporary basis. It became permanent in 1984. Congress has also expanded this further in 2001 to include the younger individuals with Lou Gehrig’s disease, also known as ALS or the scientific name is amyotrophic lateral sclerosis.Administration of Medicare The CMS or the Centers for both Medicare as well as Medicaid Services is the component of the HHS or the Department of Health and Human Services that also administers Medicaid, Medicare, CHIP which is also the Children’s Health Insurance Program, CLIA and Clinical Laboratory Improvement Amendments and also parts of the ACA or the Affordable Care Act. Along with the Department of Treasury and Department of Labor, CMS also looks into the implementation of the insurance reform and the provisions on the Accountability Act of 1996 which is Health Insurance Portability. This is also known as HIPAA. Most aspects and parts of the PPACA or the Patient Protection and Affordable Act. The SSA and the Social Security Administration is also responsible for determining the eligibility for Medicare, payment, and eligibility for Extra Help as well as the Low-Income Subsidy Payments that are related to the Part D of Medicare. It also collects the payments that are premium for the program that Medicare conducts.The Chief Actuary of the CMS is also responsible for providing the necessary cost projections and accounting information to the Trustees of the Medicare Board. It is essential in assisting them and also assessing the financial care and health of the Medicare program. The Board is also required by the law to give out annual reports regarding the financial status of the Trust Funds of the Medicare. Those reports are also required to contain the actuarial opinion statement from the Chief Actuary.Since Medicare programs started, CMS has always been the institution that was contracted with the insurance companies that are privately owned in order to operate the intermediaries between the medical providers and the government to be responsible for administering Part B as well as Part A benefits. The processes that are contracted also include the claims and the processing payment along with clinician enrollment, call center services as well as a fraud investigation. In 1997, other insurance and policy plan companies started administering Part C. In 2005, other insurance plans started administering Part D.The RUC or the Relative Value Update Committee or what is also known as the Specialty Society Relative Value Scale Update Committee is composed of a group of physicians that are associated with the AMA or the American Medical Association. This institution advises the policyholders as well as the government regarding the pay standards for the insurance plan of Medicare as well as the procedures that patients should be performed by professionals as well as doctors under Part B of Medicare. A similar yet different CMS system that also determines the rates that are paid for hospitals along with acute care. This also includes nursing facilities that are under Part A of Medicare.Financing of Medicare Medicare has also several sources where it gets its finances. The inpatient under the portion Part A can be admitted in skilled nursing and hospital coverage and this is largely funded from 2.9% of the revenue and payroll tax. The law also provided a maximum amount when it comes to the compensation of the Medicare tax as well as its being imposed every year. The Social Security tax also works in a similar way. On January 1, 1994, the government removed the compensation limit. Employees who are also self-employed are required to pay the full 2.9% on the net earnings of the self-employed individual because they are for the employer as well as the employee. They can also deduct half of the taxes from their income by calculating the income tax.Starting in 2013, the portion of Part A and its taxes from the earned income has exceeded $200,000 for every individual plan. As for married couples that filed jointly, this reached $250,000. It also rose an additional 3.8% so that the portion of the subsidies can also be paid and mandated by the PPACA.Parts D, as well as Parts B, are funded partially by the premiums that have been paid by the Medicare enrollees and these are also considered as the general revenue fund. In 2006, Medicare started adding surtax on the premium of Part B. This was targeted to seniors who earned a higher income in order to fund Part D partially. In the PPACA legislation of the income tax year 2010, Medicare added surtax to the premium portion of Part D and also targeted these to the seniors who were earning lots of income. This is also conducted so that the PPACA can be partially funded along with the beneficiaries from Part B and subject to the double surtax. There is a double amount so that it can also partially fund PPACA.Parts A, B, and D all use trust funds that are separate from one another so that there can be a reimbursement of both the receipt and disbursement of the funds that are mentioned. Part C utilizes all these trusts funds in proportion to one another so that it can be determined by the CMS and reflect that all the beneficiaries of Part C are complete in the full parts of Part A and Part B. Medicare, as well as the medical needs for each capita, are regarded as fee for service or what is also known as FFS.Medicare and its spending amounted to 15% of the whole federal spending of the United States. Research all show that this can even exceed 17% by the year 2020.The retirement of individuals who are called the Baby Boom generation is expected to increase its enrollment by 2030 and reached up to 80 million because that was how the number of workers who are enrolled in the program has declined. The figures dropped from 3.7 and to a low of 2.4. There are the rising and total health care costs that also pose the financial challenges that are substantial to the program. Medicare spending is also projected to even get higher and reach $1 trillion by the year 2020.It is important to note that for every three dollars, one dollar is spent on Medicare as part of the cost-reduction program. The cost reduction is also influenced by the various factors that include the reduction in unnecessary and inappropriate care through the evidence-based practices of evaluation along with reducing the total amount of duplicative health care. The cost reduction can also be affected by the medical errors that are done when administrative agency increases and the development of clinical guidelines reach the quality standards

Health Care Options: Using a Flexible Spending Account or Flexible Spending Arrangement

Sanjiv Gupta CPA - 3 years ago
Employees who have health plans care of their jobs can use what is called the FSA or the Flexible Spending Arrangement or Flexible Spending Account in order to cover the deductibles, copayments, drugs and health care expenses. Using the FSA reduces the taxes that they have to pay at the end of the day.What is the FSA? A Flexible Spending Arrangement (also regarded as flexible spending account) is an account where anyone can put their money in so that they can use this to cover specific health care costs straight from their pockets. The FSA has no taxes. This means the individual can save a specific amount that is similar to the taxes that he or she paid on top of the money that was set aside.To explain it further, this is a tax-advantaged account for financial purposes that are set up via what is called “cafeteria plan.” The FSA allows the employees to cast aside portions of the earnings that the policyholders pay the qualified expenses that come in the form of the plan. Money that is deducted from the pay of the employee and then to an FSA is not included in the payroll taxes. This results in substantial payroll and tax savings.There was a disadvantage when using the FSA before the Affordable Care Act. The funds that were not used will be forfeited by the employer at the end of the year. That is why employees are encouraged to use the FSA, rather than lose it. When reading the terms that are stated under the Affordable Care Act, an employee can carry the amount of a maximum of $500 over to the next year and not have to lose the funds.Employers can make contributions to the FSA of their employees but it is not a requirement.Facts About the FSAs FSAs come with a limit of $2,600 every year for every employer. If the individual is married, then the individual’s spouse can get a maximum of $2,600 in the Flexible Spending Arrangement with the employer as well.The funds in the FSA can be used to pay for specific dental and medical expenses for the individual, the individual’s spouse if married and the dependents, if there are.FSA funds can be spent to pay copayments as well as deductibles but not for premiums on insurance.FSA funds can also be spent on prescription drugs, along with medicines that are ordered over the counter with the prescription from a doctor. Insulin reimbursements are also allowed even without prescriptions.FSAs can also be used to cover the costs of medical equipment such as bandages, crutches, and diagnostic devices specifically blood sugar kits. Limits, Carry Overs and Grace Periods of the FSA Policyholders must utilize the money obtained from an FSA within the year that it was set for. However, the employers of these individuals usually offer these two options:FSA provides a specific “grace period” that can last up to 2 and ½ months in order to use as much money in the FSA.The FSA also allows the policyholder to carry over a maximum of $500 every year that can be carried over to the incoming year.Employers of policyholders can offer one of these two options. However, it is not possible that they offer both. In fact, it is not even a requirement to offer one of these.Toward the end of the year of the grace period that is given, the policyholder can lose all the money that remains in the FSA. It is very important that the individual also plans carefully and not allocate any more money in the FSA than he or she thinks can spend within that particular year on expenses such as coinsurance, medicine, copayments, and other possible health care expenses.Another important thing to note about the FSA is that it cannot be used alongside a plan from the Marketplace. The Health Savings Account or the HSA allows the policyholder to cast aside money on a pre-tax basis in order to pay health expenses if there are high deductibles in the Marketplace health insurance plans.Types of FSA A number of cafeteria plans can offer two major FSAs that focus primarily on dependent and medical care costs. There are a couple of cafeteria plans that are offered to the other kinds of FSAs. It is important to note that participation in one kind of FSA cannot affect participation in other kinds of FSA. However, the funds in FSA can be transferred from one to another.The most common kind of FSA is utilized to pay for the dental and medical expenses that were not covered by the insurance. These are usually the copayments, deductibles, and coinsurance for the health plan of the employees.  As of the 1st of January 2011, medications that are ordered over-the-counter are only allowed when bought with a prescription from the doctor, with the exception of insulin. Medical devices that can be ordered over the counter like crutches, bandages and repair kits for the eyeglasses are also allowed.Prior to the Affordable Care Act, the IRS has permitted employers to enact the maximum election for the employees. Affordable Care Act has also amended what is known as Section 125 to state that FSAs cannot let the employees choose the annual election that exceeds the limit that is determined by the IRS. The yearly limit can reach $2,500, especially for the first year. The IRS can also index the plans in the subsequent years especially for the adjustments in the cost-of-living.Employers can also opt to limit the annual elections even further. This specific limit can be applied to every employee, even without regarding the status of the employee – if he or she is married or have children or not. The contributions that are non-elective and made by employers that are not subtracted from the wages of the employees are also not added to the limit. An employee who is employed by various and multiple unrelated companies and employers can also opt to reach the limit of each employer plan. The limit also cannot apply to the HAS as well as the health reimbursement arrangements or even the share of the employee on the cost of the sponsored health insurance care that is provided by the employer.There are also employers who choose to just issue debit cards to employees who are qualified participants of the FSA. These participants can also use their debit cards in order to pay for the eligible expenses because they are part of the FSA. Grocery stores and pharmacies that opt to go for debit cards as a mode of payments have the option to not allow transactions when the participants try to pay for the items that they buy which are not qualified under FSA. Other than that, employers should require their employees to show the itemized receipts as proof for every expense that they charged using the debit card. The IRS can also let the employers waive the requirement in the situation that an individual resorts to the debit card at the grocery store or the pharmacy and comply with the procedure that is stated above. The IRS can also let the employer waive this specific requirement when the amount that is charged using the debit card has eventually become multiple forms of co-pay for the benefit of the group insurance plan for the health care of that employee. There are also cases wherein the administering firm of the FSA prefers the actual insurance. The EOBs or the Explanations of Benefits can represent the portion of the patient on the medical expenses as well as other required documentation. This is a requirement that has become less and less cumbersome especially when there are more insurers that let the patient look for the EOBs on the websites. Dependent Care FSA FSAs are also established to pay certain expenses in order to care for the dependents especially when the legal guardian is busy at work. This can pertain to child care, especially for children who are below the age of 13. This kind of FSA can also be used for the benefit of children, regardless of age, who are mentally or physically incapable of taking care of themselves. This also covers adults and senior citizens who are dependent. In addition to this, the individual or individuals who use the funds on the dependent care are regarded as dependents on the federal tax return of the employee. The funds can also not be utilized for summer camps, with the exception of days camps, or for the long-term care of parents who reside somewhere else, aside from the nursing home that is covered by the insurance provider. The FSA for the dependent care is capped federally at the amount of $5,000 for every year and for every household. Spouses can opt for an FSA but the combined amount that they can obtain must not go beyond $5,000. During tax time, each and every withdrawal that is over $5,000 can be taxed. The difference with medical FSAs is that dependent care FSAs are also not funded early on. This means employees do not have access to receive some kind of reimbursement in the exact and full amount from the contribution that is made since day one. Employees only have the option to reimburse up to a particular amount and they can also deduct that during the entire year. If the spouses are married then they can earn the income from the Dependent Care FSA. There are exceptions such as the spouse who does not work is also disabled or currently studying full time. If one spouse earns lower than $5,000 then the benefit amount of the FSA is limited to the amount that the spouse earns.Other FSAs There are also FSA plans for sponsored premium and non-employer reimbursements on parking as well as transit reimbursement. The individual account for premium health insurance lets the employee pay for the spouse’s insurance using pre-tax dollars, for as long as there is coverage that is sponsored by a non-employer. This is also considered as an individual plan and billed directly to the individual or his or her spouse. Transit and parking accounts also let the employees cover the parking expenses along with the expenses for public transit using pre-tax dollars but only up to specific limits. It may not be as common as the other FSAs listed above but there have also been a number of employers who have opted to offer assistance in any form of adoption through the FSA. An individual cannot also have health care from the FSA if she or he does not have the HDHP or what is also known as the High Deductible Health Plan that comes with the HAS. In situations such as the employee has both the FSA as well as the HDHP along with the HAS, then he or she can be qualified for what is known the LEX or the Limited Expense FSA. This is also known as the Limited Purpose FSAs. These FSAs can be used in reimbursing vision and dental expenses, no matter the deductible stated in the plan as long as it is at the discretion of the employer and the medical expenses that were incurred are eligible and qualified as soon as the deductible has been met and also reimbursed.Coverage Period The coverage of the FSA can end at the time that the plan year ends for just as a single plan or when the coverage of a particular individual has also ended. An example is when there is a loss of coverage because the employee has resigned from the position where he is governed by that employer.This means that the person who is employed by the company during a given period is only covered when he is with the company. He cannot continue his coverage beyond that.

What are Health Reimbursement Arrangements and How Do These Work?

Sanjiv Gupta CPA - 3 years ago
A HAS or what is also commonly known as Health Reimbursement Arrangement has been approved by the IRS and is funded by employers. It is a tax-advantaged health benefits insurance for the employees which allows them to be reimbursed for the medical expenses that they had to spend from out of their pockets. This is also a health insurance policy that is premium. It is important to know that HRA is not considered to be health insurance. The HRA lets the employer contribute to the account of the employee and also provide the reimbursement for expenses that are eligible. An HRA insurance plan is also a smart and efficient way to provide health insurance benefits and let the employees pay for a varied range of medical costs that are not covered by their insurance policies.The primary requirements for the HRA are 1) the plan can be funded primarily by just the employer and can also not be sponsored by deducting the salary of the employee and 2) the plan can provide the benefits especially for medical expenses that are substantiated.In other words, the HRA is regarded as a copay or a deductible. Employees can partner up with their employers on any health plan that they choose. This works by the employer setting aside the allocated budget to the employee’s HRA. This is for an annual basis. The difference between the other health spending accounts is that only the employer can put the money into the HRA. The money is also available to the employee when the year starts.HRAs can be designed however way the employer wants to fashion it. It should just suit the particular needs of both the employer as well as the employee. Interestingly, the HRA is the most flexible types, if not one of, among all the benefits plans for the employee. This is the very reason why it appeals to a number of employers.A federal legislation was passed way back December 2016 and because of this, there is an HRA that is available specifically for small businesses. These are covered by new provisions by the HRA that are targeted solely for small businesses.How to Use the HRA When the policyholder goes to the hospital or sees a doctor, the money that is in his or her HRA is already qualified to cover the medical costs. A number of the members with HRAs have a payment process that is regarded as seamless. The doctors bill the employers and the employers use the funds from the employee’s HRA to pay the costs. This processed payment will then be recorded on the benefits and the explanation or what is also known as the EOB. The individual can also check the online account.If the individual uses up all the amount that is in HRA even before the year ends, then he or she is required to pay what is owed out of his or her own pocket. If there is still money left toward the end of the year, there is a possibility that the employer may roll it over so that it can be used the next year. However, there are some employers that won’t do this so it is better to use it than lose it.What Can It Be Spent On? The employer decides which medical costs are eligible to be reimbursed. Usually, the HRAs cover:DeductiblesCopays (for PPO only)CoinsuranceThe HRA cannot be used to pay the monthly premiums of any health insurance.Advantages of the Health Reimbursement Arrangements The HRA allows both the employer and the employee to save on the healthcare expenses.These HRAs have benefits that help the policyholders save more especially when it comes to health care expenses.Affordability: The premiums for the health care coverage plans that are offered with HRAs are pretty much lower every month than any other plans out there.Employer contributions: The employer can fully fund the HRA even without any contribution from the employee.Enrolling in the HRA can also provide major advantages, especially to employees. These are reduced health insurance premiums that result from the Health Plan that is High Deductible and the availability of sponsored funds from the employer to pay the medical costs that are incurred previously to the point when the deductible of the insurance has been met.Expenses can be reimbursed from HRA depending on the design of the plan. This covers co-payments, prescription medications, dental expenses, vision expenses, co-insurance, and deductibles. This also includes other health-related expenses that were first paid by the employee from their pockets.HRA funds are also contributed to the employees but on a pre-tax setting. The funds, therefore, aren’t taxable, especially to the employee. Hat being the case, employees do not have to claim that there is a deduction in their income tax for the expense that was reimbursed because of the HRA.How the HRA Benefits the Employer HRAs are commonly offered in relation to the Health Plan that is High Deductible. There is a rule that the High Deductible Plan results in a premium cost that has been reduced can create real savings for the healthcare costs which benefits the employer. HRA contributions can also be funded through the savings that are gained from the premium costs on the lower statute. By funding the HRA, the company’s employer can effectively bridge the gap that separates the higher deductibles from the expenditure amounts. This is where the insurance coverage gets a kick for the employees.Above all, the contributions of the employer to the health reimbursement arrangements are completely tax-deductible. It is also tax-free for the employee.Employers can establish the costs of the HRA funds – this includes every health-related qualified expense. Since these are also flexible, the HRA coverage allows the employers to control the costs especially when providing the benefits from the healthcare policy and at the same time provide benefits to the valued employee.With the HRA< the healthcare expenditures of the employee are clear and visible for both the employer and the employee. This fosters a more open communication pathway as well as a bigger understanding on the overall costs of healthcare. On top of this, employees can also control and monitor the total healthcare costs and the upside to this is that they become more intelligent and more conscientious when consuming anything related to healthcare.Definition of Terms Deductible, Co-insurance, and Co-pay: Every medical expense that applies to the health plan as deductibles, co-pay amount and coinsurance total can all qualify and be eligible for reimbursement. These qualified expenses are incurred by employees as well as the family of the employees. The EOB or the statement on the Explanation of the Benefits that show the evidence of expenses. It applies to the deductible on the insurance and is also required for subtracting the requests for reimbursement. Deductible: The total medical costs that apply to the deductible amount of the health plan can all qualify for reimbursement. This plan is the design that also does not include co-insurance or co-pay amounts. The qualified and eligible expenses that have been incurred by both the employee as well as the employee’s family are also considered as deductible. The EOB statement is required in order to substantiate requests for reimbursements.All Medical Expenses That Are Uninsured: All medical expenses that were paid from the pockets of the employees or what is also regarded as uninsured costs are qualified and eligible. This also includes co-pays, dental, prescription, vision, coinsurance, and deductibles. These expenses can also be incurred via the employee or the family of the employee. Proof includes the EOB statement, the receipt the bill that identifies the specific date of service, the total amount of rendered service and the official name of the business of the service that provided this to the employee. These are the usual paperwork that are required to substantiate the reimbursement requests.Specific Expenses: There are plans that are designed to just cover one limited service such as just dental, just vision, just orthodontia, just prescription medicine and more. Copies of the receipt or copies of the bill that also identify the date when the service was rendered, the total cost of the service and the provider of the service can be used to request for reimbursement.More Facts About Heath Reimbursement Arrangements One thing that should be known about the HRA is that these are merely notional arrangements. There are no funds that must be considered as expenses, not until the reimbursements have been paid. Through the Health Reimbursement Arrangements, employers can reimburse the employees directly, but this is only after the medical expenses that were incurred by the employee have been approved.There are Annual Limits for some Health Reimbursement Arrangements Like that of the HSA or the health savings account, there are limits to the overall amount of cash that any employer contributes to specific HRAs. There are annual contributions of the employer for HRAs of small businesses and reach a cap that amounts to $4,950. This is for single employees. If the employee has a family, then the cap is $10,000.As for the other HRAs, like the one-person HRA that is Stand-Alone and the Integrated HRA, the contributions on a yearly basis are limitless.Eligible Expenses of Health Reimbursement Arrangement An HRA can be reimbursed at any expense and is also regarded as an eligible medical cost as stated under Section 213 of the IRS code. This includes the premiums for the health insurance coverage care of policies. It is also under the IRS guidelines that employers can restrict what can be reimbursed in whatever way the opt to especially since it is their health reimbursement arrangement plan.HRAs Can Roll Over The HRA can also roll forward to the next month or even the next year. It depends on the Health Reimbursement Arrangement Plan as chosen by the employer. The small businesses that have HRA can also roll forward to another month. The difference is that they cannot roll onward to the next year.As for the Stand-Alone HRAs for a single individual or the Integrated HRAs, there are employers that let the balances accrue from one specific year and then onward to the next year. They can also design these programs in such a way that makes it not possible for the HRA to roll over annually.Employers can let the employees access their HRA accounts when they retire.Reporting Features of the Administration of the HRA The reporting features of the HRA administration require monitoring in real-time. The liabilities, utilization, and reimbursements have to be meticulously looked at. Employers can also change the plans and the benefits any time they want or they can cancel it altogether, as long as the HRAs of the Small Businesses are supplied to the employees and they are also informed ahead of time.Discrimination Testing Along with the HIPAA The HIPAA is also known as the Act for the Accountability and Portability of Health Insurance. Plans should avoid discrimination especially concerning the employees. This includes looking into the plan’s parameters and the allocation of the funds. It must ensure all employees can have similar access to this particular funded account.HRA is also for Retired Employees There are HRA plans that cover employees who are already retired, as well as their spouses and their tax dependents. Employers consider the HRA as the alternative to traditional healthcare in a retirement home, which is actually more expensive.What Happens to the Health Reimbursement Arrangements When Employee Resigns? Since the employer owns the account of the employee and the latter decides to leave the job that he gets from the employer, he may only be able to keep using it, once the employer decides to let him or the costs are qualified. If not, then the benefits end once the employee resigns and it’s only fair that it does.If the individual is unsure whether the company and the employer offers HRA, the way to find out is to directly speak with the Human Resources Department and find out.

Archer MSA – Tax-Exempt Custodial Account or Trust

Sanjiv Gupta CPA - 3 years ago
Archer MSA is the tax-exempt custodial account or trust that is set up with financial institutions like the insurance companies or the banks. Contributions that are made into this account can also be used as payment for healthcare costs that are not under the health insurance policy coverage.Benefits from the Archer MSA Insurance costs can be loweredContributions, as well as any interest or earnings on these contributions, can grow free of tax until it withdrew. This is like the contributions that are tax-free when it is used to cover the expenses for qualified medical costs.It is possible to deduct the individual’s contributions atop the income tax return even if this is not itemized. Who can have Archer Medical Savings Account? There are two rules to determine whether the person qualifies for the Archer MSA or not:The individual must be working for a small business or a small employer. The definition of a small employer is an entrepreneur who has an average of 50 or even fewer employees in the course of two years.The individual must have an HDHP or high deductible health plan. The HDHP has a higher deductible than a number of health plans out there and also has maximum limits when set alongside the amount that must be paid for out of pocket costs.The premiums for the High Deductible Health Plan are usually 20 to 50% lower than the health plans that have lower deductions. If the individual is self-employed, then these are also tax-deductible.The HDHP must also meet specific IRS requirements so that the individual can qualify and get his or her own Archer Medical Savings Account. The basis is types of coverage, the minimum annual and the maximum annual.Who Would This Work For? The individual can only obtain an Archer MSA if he or she is enrolled in a high deductible health plan that is eligible and qualified. The kind of plan that is ideal for a young individual who is in good condition and single is the Archer MSA because, for others, this can be quite a big and serious gamble financially due to the high deductibles as well as the requirements that must be met to be qualified for the insurance coverage.If the Archer MSA is the only kind of insurance that is possible to get, then it is better the individual saves and has enough money in order to meet the deductions from the MSA. In doing so, this ensures that he or she is saving money that is tax-free instead of paying the amount right there and then, fresh from the person’s checking account, even after it has already been taxed.Archer MSA must be paired with HDHP Usually, the Archer MSA is paired with HDHP or what is called the High Deductible Health Plan. This is because the HDHP has higher deductibles compared to most health plan coverage. It also has a limit on the total amount that the individual must pay to cover the expenses that he or she first shelled out cash for. The premiums for HDHP must also meet the certain requirements set by the IRS so that it can be used with the Archer Medical Savings Account.Requirements for Archer Medical Savings Accounts The legislation that provides Archer MSAs expired toward the end of 2007. Taxpayers, as well as their employers, cannot establish Archer Medical Savings Accounts any longer. However, if they have existing accounts prior to 2007 then they can use and contribute to this.How MSAs Work Archer MSAs are custodial accounts that come with insurance providers and financial institutions. These are accounts that are tax-deductible and can be used to qualify for medical expenses. Similar to HSA or what is also known as health savings accounts, the Archer Medical Savings Account function in a similar manner as the IRA or the individual retirement accounts. The employee or the employer can also contribute to Archer Medical Savings Account. The individual can deduct from the contributions in the taxes, these are also subject to a couple of rules. Archer Medical Savings Account has an interest that can be tax-free and even tax-deferred. The withdrawals for these medical expenses may often be free from tax withdrawals for the non-medical reasons for it being taxable. If that is the case, then the penalties apply.Archer Medical Savings Accounts Are Not Substitutes for Health Insurance It is important to note that the MSAs are not substitutes for health insurance plans. It may be eligible for health care costs that are not included in the insurance. The individual must then cover the high-deductible health care insurance during the time that this has been established in Medical Savings Account.Qualifying Medical Expenses There are tax-free contributions and distributions from the Archer Medical Savings Account that can also be brought into consideration all for the purposes of following the medical costs. These are:Emergency treatmentDental CareHospitalizationPrescription drugs, which also includes insulin and medications that can be ordered over the counter as long as these are prescribed by physiciansAcupunctureCOBRA continuation coveragePremiums from the health insurance and policy plan if the individual is unemployedAmbulance serviceChiropractic CareLab workVision careDoctor’s visitsIf the individual withdraws money from his account for other purposes, then the funds are regarded as taxable and considered as regular income.There is a 20% tax penalty that is applied to the amount of the withdrawal unless the individual is aged 65 or older and disabled. This increase in penalty ranges from 15% in 2011. When the individual is older than 65, then he or she can withdraw the unused portion of the Archer Medical Savings Account in order to supplement the costs of retirement.The distributions and contributions that have been made must be reported especially when these are eligible medical expenses.Tax-Deductible Contributions The contributions that are limited based on the amount of the individual’s health plan policies are also deductible. If there is a family healthcare plan, then it is possible to deduct 75% on the annual premium. Other than that, 65% can also be deducted.Both the employee and the employer can contribute to the Archer Medical Savings Account of the former. The only difference is this contribution is done on different dates. The health insurance policy of the employee cannot have lapses at any given time of that year. The contributions of the employer cannot also exceed the annual earnings.Taxable Contributions If the employer is the one responsible to make contributions to the account then it also exceeds the maximum that is allowed by the health plan of the employee. As mentioned previously, the employee must pay a 6% tax atop the amount.Making Contributions to the Archer MSA The tax-deductible on the contributions to the Archer Medical Savings Account is made by either the employee or the employer but not by both in a similar year. The employee must also be covered by the HDHP that whole year in order for the full amount to be deducted. The contributions of the employer are also nontaxable to the individual.There are limitations to the total amount that is contributed to the Archer Medical Savings Account. The maximum of this is 75% on the annual plan deductible on the health care costs. This is for the family plan. It is 65% if it is a family plan. An example of this calculation of this is that a family plan has a deductible of $4,800 and it is possible for the individual to contribute $3,600 every year. If it is, on the other hand, an individual plan, then it has a $2,400 deductible. The most that the individual can contribute is a total of $1,560.Any contributions that go beyond the maximum cannot be deducted from tax and the individual will also pay 6% for the excise task on the amount. Another limitation is contributions cannot exceed what the individual earned for the whole year.Withdrawing Money from Archer MSA It is possible for the policyholders to withdraw funds from their Archer Medical Savings Account in order to cover for the medical expenses that have not been reimbursed. There are some trustees that furnish the checks for the individual to write himself or herself. Then there are others who give them debit cards so that it can provide instant access to the Medical Savings Account of the Archer funds.The individual and the trustee must report the distributions. However, the individual is not required to pay the income tax as long as this was used for an eligible medical cost like ambulance service, dental expenses, emergency treatment, hospitalization, prescription drugs, chiropractic and acupuncture, wellness and preventive programs, vision care that includes glasses, lab services, health insurance premiums while unemployed, doctor’s office visits and COBRA continuation coverage.If any portion of the contribution was regarded as non-qualified medical costs, like the premiums for the HDHP, then the individual must pay the income tax including the penalty tax of 15% on the amount. However, there is also no penalty if the individual is disabled, aged 65 and older or passed away in that said year.Archer Medical Savings Accounts are portable and will stay with the policyholder even if there is a change in employers. Any money that was not used for that year primarily for medical reasons can continue to grow and even be tax-deferred and remain in the account. The option to invest is still a choice and it will affect the return rate. Just like any investment, the individual must make sure that there are risks when they do choose to sign up.What Happens to the Money from Archer MSA? If the person does not use the money by the end of the year, then it rolls over. If the individual dries to access the allotted money for other expenses aside from medical reasons, this will be taxed. It is possible to control how little or how much money can be deposited so policyholders are advised to plan wisely.Deciding Between the HSA and the Archer MSA When the individual has the Archer Medical Savings Account, it is only necessary that he or she also checks the same kind of savings, specifically the HSA or the health savings account. The latter was created as a significant part of the Medicare Prescription Drug, Modernization, and Improvement Act in 2003 to expand the benefits that were offered by the MSA Funds from the Archer Medical Savings Account and that can then be carried over to the HSA, therefore making it easier and simpler for the individual to just go to one kind and then to another. However, before the individual can do this, he or she should understand the major differences between the HAS and the Archer MSA.An eligible individual below the age of 65 who is under health insurance that qualifies for HDHP can have a HAS; on the other hand, an individual who is self-employed or a small business employee who his covered by an HDHP that qualifies can also start having an Archer MSA.The minimum amount that is deducted can also be applied to the individual’s HDHP and also used alongside the HAS that has $1,200 for the individual as well as $2,400 for plans that cover family. It is also lower than the usual minimum annual deductions that are applied to the HDHP when putting alongside the Archer Medical Savings Account.Both the employee and the employer (if there are) can contribute to the HAS in the same year. The Archer MSA does not let the contributions from the employee and the employer be processed in a similar year.The individual can contribute more every year to the HSA than he can contribute to the Archer Medical Savings Account. The annual contributions to the HSA can be limited to the amount of $3,050 for individual plans and $6,150 for family plans.If the individual reaches the age of 55 by the end of the year, then they can also catch up in terms of contributions to their HSA. It can even amount to $1,000. There are no more catch up contributions that can also be made to the Archer Medical Savings Account.
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