Washington Watch - January 15, 2014


Washington Watch - January 15, 2014

Happy New Year! You Get To Pay More Taxes

Individuals and families will see a little less in their paychecks starting January 1, 2014- wage earners and self-employed individuals who make more than $200,000 (individual) and $250,000 (couple) will be assessed an additional .9% Medicare surtax on top of the existing 1.45% Medicare payroll tax as well as a 3.8% Medicare tax on unearned income (investment dividends, rental income, interest and capital gains on property).

Individual and families falling below the $200,000 will experience new restrictions on medical expense deductions and flexible spending accounts, including penalties for spending money on non-qualified medical expenses (simple human error!).

Additionally, tax payers who itemize their medical expense deductions will only be able to do so if those expenses exceed 10% of adjusted gross income (AGI); previously it was 7.5%. One carve-out, individuals and/or your spouse who are 65 or older will be exempted from the increase and will still be able to use the 7.5% threshold.

The biggest tax hit will be faced by those individuals and families that fail to show proof of a qualified health care plan or a Grandfathered health care plan for 2014. Failure to do so will result in a fine of $95 or 1% of your income – whichever is higher – in 2014. That fine increases to $325 or 2% of income in 2015 and $695 or 2.5% of your income by 2016.

Clearly challenges persist as it relates to the Affordable Care Act and its implementation; the NASE continues to work with lawmakers to mitigate the financial impact of the law on the 23 million self-employed who are working hard every day to fuel our economic recovery. Access to affordable and comprehensive health insurance shouldn’t have a negative tax impact on the self-employed.

Learn more on the impact of the changes in the tax code on the self-employed!

Hardship Exemption Offered for Those Receiving Cancellation Letters

In an attempt to quiet the firestorm over millions of Americans receiving cancellation letters for private health care plans; were offered a reprieve by the Department of Health and Human Services in the form of being eligible to claim a new hardship exemption (and therefore avoid the Individual Mandate penalty) and apply for catastrophic insurance that was previously only available to those 30 years and younger.

If an individual received a cancellation letter and is unable to find an affordable substitute to the plan they previously held, they would be eligible for the hardship exemption (with proof of cancellation) which would waive the penalty under the Individual Mandate requirement. In addition, those individuals would be eligible to purchase a catastrophic plan in a bid to at least have some minimum level of coverage for 2014. Previously catastrophic plans had not been available for those 30 years and over. While the coverage of a catastrophic plan does not meet the Essential Health Benefits requirements and therefore, the Individual Mandate, those showing proof of a cancelled plan would be waived from the penalty.

Read NASE Press Release on the Hardship Exemption Change.

Likely Change in Leadership on Senate Small Business and Entrepreneurship Committee

With the end of year announcement that Senator Max Baucus (D-MT) would be resigning and accepting the nomination to serve as an Ambassador to China, the Senate will be thrown into a round of musical chairs as it relates to several committees, including: Small Business and Entrepreneurship, Finance, Energy and Natural Resources, and Indian Affairs.

The most likely scenario is Senator Mary Landrieu (D-LA) would become chair of the Senate Energy and Natural Resources, a plum position and one that would potentially help in her re-election efforts, as she makes the argument that her seniority benefits the state and voters of Louisiana. This would allow for Senator Maria Cantwell (D-WA) to move into the chair position for the Small Business and Entrepreneurship Committee- which would dovetail nicely with her Finance committee role as she serves on the Subcommittee for Health Care and Taxation, two of the biggest issues for the self-employed and small business community.

No definitive changes will be made until Senator Baucus is confirmed as Ambassador by the U.S. Senate, which is expected in the first quarter of 2014.

Washington Watch Online

Visit NASE Advocacy to view archived editions of Washington Watch. While you’re there, read the latest updates from the Washington, D.C. office, write your Congressperson, and find out how you can join the fight for micro-business.

Courtesy of NASE.org