The Additional Hospital Insurance Tax: Possibly the most expensive 0.5% tax ever created


As more information surfaces from the Affordable Care Act, aka Obama Care, the little hidden fees & taxes are starting to mount up and unfortunately SEC. 9015. ADDITIONAL HOSPITAL INSURANCE TAX ON HIGH-INCOME TAXPAYERS on page 753 of ACA is no different, but this just may cost employers more than what is advertised

Under this section, the ruling states that anyone earning over $200,000 per year in the form of income from an employer will be taxed an extra 0.5% to help offset the cost of hospital insurance, for couples the amount is $250,000. To quote the ACA:

“ADDITIONAL TAX. -- a tax equal to 0.5 percent of wages which are received with respect to employment during any taxable year beginning after December 31, 2012, and which are in excess of--

  • ‘‘(A) in the case of a joint return, $250,000, and
  • ‘‘(B) in any other case, $200,000.’’.

On the surface this seems like a harmless, just another nickel & dime penalty on those that earn too much money in the eyes of the government, until the next part of the section sets in, the SPECIAL RULES FOR ADDITIONAL TAX.

This section lays the groundwork on who exactly will be penalized and who exactly will pay the penalty.

The first part of this section, sec. 9105, defines the who as anyone that earns “wages from the employer in excess of $200,000” and then continues to state that “the employer may disregard the amount of wages received by such taxpayer’s spouse”.

But keep in mind that “couples” earning over $250,000 will get hit by the penalty and that the ruling clearly states that employers needn’t worry about wages the spouse earns.

The reason this becomes a hot button issue & a perfect set up is the second part of this ruling which states “If an employer, in violation of this chapter, fails to deduct and withhold the tax imposed by section 3101(b)(2) and thereafter the tax is paid by the employee, the tax so required to be deducted and withheld shall not be collected from the employer, but this paragraph shall in no case relieve the employer from liability for any penalties or additions to tax otherwise applicable in respect of such failure to deduct and withhold.’’ 

See the problem????

If an employer doesn’t withhold the tax from an employee and the employee does not pay the tax then the employer is the hook for at least the penalties & quite possible the tax itself.

This hits home for those employees earning say $95,000 at company A while their spouse who is at company B earns $175,000. Both employers won’t see a need to withhold the tax since their employees are well under $200,000 and how would they know what the other spouse’s wage is too, they have been told to disregard it anyways, but if this couple neglects to pay this tax, then BOTH companies are now on the hook.

Ultimately, there is a very simple non threatening tax to employees who earn too much income on the books that could in turn affect their respective employers in an uncertain way in by 2014 with very little attention being drawn to it.

The impact from this 0.5% tax could possibly lead to employers withholding this simple 0.5% tax for every employee they have for precautions sake or even worse, they may now have to demand information on their employee’s spouses just to protect themselves from the government.

The ACA has created a double whammy that will affect companies throughout the country even though they just may happened to follow the rules to a tee. Hopefully it is becoming clearer that when our politicians state that the Affordable Care Act will help pay down the deficit what they really mean to say is that we will be paying down the deficit.

As with everything in a bill that we had to pass before we could read, the uncertainties are enormous and the possible penalties employers will face because of this section of the ACA is just one example.

Whoever stated the famous idiom “What you don't know won't hurt youclearly did not have to deal with the Affordable Care Act & health care costs




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