Health Reform Passes - Penalties are “Taxes”

HBS Tax Preparation Services

In the Supreme Court’s 5-4 decision allowing most of the Affordable Care Act to stand, Justice John Roberts interpreted “fees” levied on individuals who choose not buy something (in this case health insurance) as a tax and not a penalty.  If such a fee is, in fact, a tax (and not a penalty), Justice Roberts reasoned, it falls within the scope of congress’s constitutional authority. 

Although such an interpretation may have profound legal and social implications, those of us in the tax profession are waiting to see if the IRS shares Justice Robert’s sentiment: Will this “penalty/tax” be a deductible business expense or a nondeductible penalty?  Many taxes such as the employer’s share of social security and Medicare are deductible.  Penalties for a violation of law or legal “mandate,” however, are generally not.

Professionals who had taken a wait-and-see posture regarding the Act’s constitutionality are also starting to dig into the details of the Affordable Care Act.  This article will share a few uncovered details that may impact you and/or your business in 2013.  It will also discuss the penalty/tax scheduled to begin in 2014.

2013

2014: The Penalty/Tax Kicks In:

This article has highlighted a few of the major tax changes created by the Affordable Care Act for 2013 and 2014.  This article (or any article) should not be relied upon to make tax or financial decisions.  If you would like assistance regarding a particular tax issue or have a question regarding how Health Care Reform may impact you and/or your business’s tax obligations, please feel free to contact our office to consult with a tax professional.

 

 

Brett Hersh's avatar
  • Author: Brett Hersh
  • Bio: Brett Hersh, EA, MBA, is the owner of HBS TAX & Small Business Experts. He is an Enrolled Agent (EA) with the IRS and licensed by the US Treasury Department to prepare all tax returns and represent taxpayers before the IRS for audits, collections and appeals. He is also Dave Ramsey’s ELP for Tax and Accounting, a continuing education instructor for tax professionals through Lorman Education, and a local speaker/presenter on the topics of tax and business growth. He can be reached at (304) 267-2594.