By DANIEL P. KESSLER
The subsidies to buyers of 'qualifying' insurance policies will induce sharp reductions in the supply of labor.
Supporters of ObamaCare acknowledge it will have some unintended consequences. Yet surprisingly little attention has been focused on the law's most problematic provision: government subsidies to help individuals and families purchase health insurance.
This new entitlement—which the chief actuary of the Centers for Medicare and Medicaid Services estimates will cost more than $100 billion per year once it is fully implemented—will damage the country's long-term fiscal outlook. It also will introduce far-reaching negative effects on rewards to work and bizarre new inequities into American life.
The health law establishes insurance exchanges—regulated marketplaces in which individuals and small businesses can shop for coverage—and minimum standards for the insurance policies that can be offered. Because the policies will be so costly, there's a subsidy for buyers that phases out as family income rises. This sounds reasonable—but the subsidies required to make a "qualifying" insurance policy affordable are so large that their phaseout creates chaos.
Starting in 2014, subsidies will be available to families with incomes between 134% and 400% of the federal poverty line. (Families earning less than 134% of poverty are eligible for Medicaid.) For example, a family of four headed by a 55-year-old earning $31,389 in 2014 dollars (134% of the federal poverty line) in a high-cost area will get a subsidy of $22,740. This will cover 96% of an insurance policy that the Kaiser Family Foundation predicts will cost $23,700. A similar family earning $93,699 (400% of poverty) gets a subsidy of $14,799. But a family earning $1 more—$93,700—gets no subsidy.
For more, read the entire editorial at http://online.wsj.com/article/SB10001424052748704628404576265692304582936.html
Monday, April 25, 2011
Saturday, April 16, 2011
Where your tax dollars go
http://news.yahoo.com/s/yblog_exclusive/20110415/pl_yblog_exclusive/a-taxpayer-receipt-calculate-exactly-where-your-tax-dollars-go
By Jane Sasseen – Fri Apr 15, 11:09 am ET
Just how much do you spend to foot the bill for U.S. troops in Iraq and Afghanistan? What's your share of the tab for interest on the national debt? How about to fund Medicare and Social Security, or to support foreign aid or the FBI?
By Jane Sasseen – Fri Apr 15, 11:09 am ET
Just how much do you spend to foot the bill for U.S. troops in Iraq and Afghanistan? What's your share of the tab for interest on the national debt? How about to fund Medicare and Social Security, or to support foreign aid or the FBI?
Friday, April 15, 2011
Expanded 1099 filing by Obamacare is repealed
http://www.journalofaccountancy.com/Web/20114071.htm
On Thursday, President Barack Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4; 1099 Act), which repeals both the expanded Form 1099 information reporting requirements mandated by last year’s health care legislation and also the 1099 reporting requirements imposed on taxpayers who receive rental income enacted as part of last year’s Small Business Jobs Act (PL 111-240). The Senate approved the bill on April 5, and the House voted in favor of it on March 3.
In March 2010, the Patient Protection and Affordable Care Act (PL 111-148) (part of the health care reform legislation) expanded the 1099 reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation), and to include payments made for property, starting with payments in 2012. The 1099 Act repeals the expansion to payees that include corporations by removing IRC § 6041(i). It repeals the expansion to cover payments for property by removing the language “amounts in consideration for property,” and “gross proceeds” from section 6041(a). The act also removes IRC § 6041(j), which granted the Treasury secretary authority to issue regulations under section 6041, including “rules to prevent duplicative reporting of transactions.” These changes are effective for payments made after Dec. 31, 2011 (when the new rules were to take effect), and they revert those portions of section 6041 to how they were before the Patient Protection and Affordable Care Act.
The Small Business Jobs Act enacted a requirement that individuals who receive rental income issue Forms 1099 to service providers for payments of $600 or more. It did this by specifying that “a person receiving rental income from real estate shall be considered to be engaged in a trade or business of renting property.” The 1099 Act strikes IRC § 6041(h) in its entirety, effective for payments made after Dec. 31, 2010 (the original effective date of section 6041(h)), placing individuals who receive rental income in the same position as if the expanded information reporting requirements had never been enacted.
As a result of the repeal, the 1099 reporting rules continue unchanged: Namely, under IRC § 6041(a), “All persons engaged in a trade or business and making payment in the course of such trade or business to another person” of $600 or more must report the amount and the name and address of the recipient to the IRS and to the recipient. The Code applies this requirement to payments of “rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income,” and the Treasury regulations add, “commissions, fees, and other forms of compensation for services rendered aggregating $600 or more” as well as interest (including original issue discount), royalties and pensions (Treas. Reg. § 1.6041-1(a)(1)(i)).
This required information must be reported each calendar year for payments made during that calendar year.
The AICPA had advocated strongly for repeal of both provisions and as one of the only organizations advocating against the rental property requirement was a driving force in its repeal. When the Senate passed the bill on April 5 and sent it to President Obama for his signature, AICPA President and CEO Barry Melancon described the repeal as “a victory for taxpayers.”
Increased Penalties Not Repealed
The 1099 Act did not repeal the increase in the information reporting penalties that were mandated by the Small Business Jobs Act. The first-tier penalty under IRC § 6721 for failure to timely file an information return was increased from $15 to $30, and the calendar-year maximum from $75,000 to $250,000. The second-tier penalty was increased from $30 to $60, and the calendar-year maximum from $150,000 to $500,000. The third-tier penalty was increased from $50 to $100, and the calendar-year maximum from $250,000 to $1,500,000. For small business filers, the calendar-year maximum increased from $25,000 to $75,000 for the first-tier penalty; from $50,000 to $200,000 for the second-tier penalty; and from $100,000 to $500,000 for the third-tier penalty. The minimum penalty for each failure due to intentional disregard increased from $100 to $250.
The increased penalties will be adjusted for inflation every five years.
The Small Business Jobs Act also similarly increased the penalties for failure to provide correct payee statements in addition to the information reporting penalties (IRC § 6722).
The increased penalty amounts were effective Jan. 1, 2011, and remain in effect after the repeal of the expanded 1099 reporting requirements.
On Thursday, President Barack Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4; 1099 Act), which repeals both the expanded Form 1099 information reporting requirements mandated by last year’s health care legislation and also the 1099 reporting requirements imposed on taxpayers who receive rental income enacted as part of last year’s Small Business Jobs Act (PL 111-240). The Senate approved the bill on April 5, and the House voted in favor of it on March 3.
In March 2010, the Patient Protection and Affordable Care Act (PL 111-148) (part of the health care reform legislation) expanded the 1099 reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation), and to include payments made for property, starting with payments in 2012. The 1099 Act repeals the expansion to payees that include corporations by removing IRC § 6041(i). It repeals the expansion to cover payments for property by removing the language “amounts in consideration for property,” and “gross proceeds” from section 6041(a). The act also removes IRC § 6041(j), which granted the Treasury secretary authority to issue regulations under section 6041, including “rules to prevent duplicative reporting of transactions.” These changes are effective for payments made after Dec. 31, 2011 (when the new rules were to take effect), and they revert those portions of section 6041 to how they were before the Patient Protection and Affordable Care Act.
The Small Business Jobs Act enacted a requirement that individuals who receive rental income issue Forms 1099 to service providers for payments of $600 or more. It did this by specifying that “a person receiving rental income from real estate shall be considered to be engaged in a trade or business of renting property.” The 1099 Act strikes IRC § 6041(h) in its entirety, effective for payments made after Dec. 31, 2010 (the original effective date of section 6041(h)), placing individuals who receive rental income in the same position as if the expanded information reporting requirements had never been enacted.
As a result of the repeal, the 1099 reporting rules continue unchanged: Namely, under IRC § 6041(a), “All persons engaged in a trade or business and making payment in the course of such trade or business to another person” of $600 or more must report the amount and the name and address of the recipient to the IRS and to the recipient. The Code applies this requirement to payments of “rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income,” and the Treasury regulations add, “commissions, fees, and other forms of compensation for services rendered aggregating $600 or more” as well as interest (including original issue discount), royalties and pensions (Treas. Reg. § 1.6041-1(a)(1)(i)).
This required information must be reported each calendar year for payments made during that calendar year.
The AICPA had advocated strongly for repeal of both provisions and as one of the only organizations advocating against the rental property requirement was a driving force in its repeal. When the Senate passed the bill on April 5 and sent it to President Obama for his signature, AICPA President and CEO Barry Melancon described the repeal as “a victory for taxpayers.”
Increased Penalties Not Repealed
The 1099 Act did not repeal the increase in the information reporting penalties that were mandated by the Small Business Jobs Act. The first-tier penalty under IRC § 6721 for failure to timely file an information return was increased from $15 to $30, and the calendar-year maximum from $75,000 to $250,000. The second-tier penalty was increased from $30 to $60, and the calendar-year maximum from $150,000 to $500,000. The third-tier penalty was increased from $50 to $100, and the calendar-year maximum from $250,000 to $1,500,000. For small business filers, the calendar-year maximum increased from $25,000 to $75,000 for the first-tier penalty; from $50,000 to $200,000 for the second-tier penalty; and from $100,000 to $500,000 for the third-tier penalty. The minimum penalty for each failure due to intentional disregard increased from $100 to $250.
The increased penalties will be adjusted for inflation every five years.
The Small Business Jobs Act also similarly increased the penalties for failure to provide correct payee statements in addition to the information reporting penalties (IRC § 6722).
The increased penalty amounts were effective Jan. 1, 2011, and remain in effect after the repeal of the expanded 1099 reporting requirements.
Friday, April 8, 2011
Social Security cuts mailing earnings statements
http://www.cbsnews.com/stories/2011/04/08/national/main20052126.shtml
(AP)
WASHINGTON - Those yearly statements that Social Security mails out — here's what you'd get if you retired at 62, at 66, at 70 — will soon stop arriving in workers' mailboxes. It's an effort to save money and steer more people to the agency's website.
The government is working to provide the statements online by the end of the year, if it can resolve security issues, Social Security Commissioner Michael Astrue said. If that fails, the agency will resume the paper statements, which cost $70 million a year to mail, he said.
"We'll provide it, we expect, one way or another, before the end of the calendar year," Astrue told The Associated Press. "We're just right now trying to figure out the most cost-effective and convenient way to provide that to the American public."
The statements, mailed to 150 million people each year, project future benefit payments, helping workers plan for retirement.
The decision to suspend the mailings was unrelated to the talk of a possible partial government shutdown. It was, however, related to the agency's operating budget, which has essentially been frozen at 2010 levels — minus about $350 million in economic stimulus money the agency had been using to handle claims.
Advocates for older Americans say they are sympathetic about the agency's budget problems, but several said an online option is insufficient, especially for people who may not have computer skills or access to computers.
"As far as the information being available online, that's not going to help a lot of people we work with," said Max Richtman, executive vice president of the National Committee to Preserve Social Security and Medicare.
"This was a concrete piece of paper, a document that workers would receive that would give them confidence in the program," Richtman said. "Otherwise, they hear a lot of the debate in Washington. It's going to be there; it's not going to be there."
Claims for retirement and disability benefits are up significantly since the nation's economy soured in 2008. About 2.7 million people applied for retirement benefits last year, a 17 percent increase from 2008, according to agency statistics. About 3.2 million people applied for disability benefits last year, a 23 percent increase.
Since the 1980s, Social Security statements have been mailed each year to workers older than 25. They include a history of taxable earnings for each year — so people can check for mistakes — as well as the total amount of Social Security and Medicare taxes paid over the lifetime of the worker.
The statements provide estimates of monthly benefits, based on current earnings and when a worker plans to retire. Workers can claim early retirement benefits starting at age 62. Full benefits are available at age 66, a threshold that is gradually increasing to 67 for people born in 1960 or later.
The statements are mailed throughout the year, so many people have already received them this year. Tens of millions have not.
The agency does offer a benefits estimator on its website that Astrue said can be even more helpful than the annual Social Security statements. Workers can enter their Social Security numbers on the website and get estimates of future benefits, depending on when they plan to retire.
"You can go online and you can get a very accurate estimate of your likely retirement benefits," Astrue said. "You can run scenarios."
The website, however, does not provide the detailed earnings and payroll tax history that workers had been receiving in the mail each year.
Mary Johnson, a policy analyst at The Senior Citizens League, said the detailed paper statements help workers ensure they are getting credit for their proper earnings each year.
"When we get these we realize just how modest our benefit will be, and the need for savings, and to work as long as we are able to," Johnson said in an email.
Ending the statements is part of a trend in government to conduct more of its business electronically. Social Security already mails out few paper checks. About 88 percent of beneficiaries have their payments deposited directly into bank accounts.
Social Security has been beefing up its website in recent years, offering more services and information online as millions of computer-savvy baby boomers reach retirement age. The agency launched a new public campaign this week featuring two celebrities that baby boomers will find familiar: actors Patty Duke and George Takei.
Takei starred in the original "Star Trek" TV show, and the campaign features ads playing on a "Star Trek" theme, with Duke and Takei emphasizing how easy it is to apply for benefits online.
About 41 percent of applications for retirement benefits come in online, Astrue said. About 44 percent of Medicare applications are done online. In all, the agency's website attracts about 11 million visitors each month.
(AP)
WASHINGTON - Those yearly statements that Social Security mails out — here's what you'd get if you retired at 62, at 66, at 70 — will soon stop arriving in workers' mailboxes. It's an effort to save money and steer more people to the agency's website.
The government is working to provide the statements online by the end of the year, if it can resolve security issues, Social Security Commissioner Michael Astrue said. If that fails, the agency will resume the paper statements, which cost $70 million a year to mail, he said.
"We'll provide it, we expect, one way or another, before the end of the calendar year," Astrue told The Associated Press. "We're just right now trying to figure out the most cost-effective and convenient way to provide that to the American public."
The statements, mailed to 150 million people each year, project future benefit payments, helping workers plan for retirement.
The decision to suspend the mailings was unrelated to the talk of a possible partial government shutdown. It was, however, related to the agency's operating budget, which has essentially been frozen at 2010 levels — minus about $350 million in economic stimulus money the agency had been using to handle claims.
Advocates for older Americans say they are sympathetic about the agency's budget problems, but several said an online option is insufficient, especially for people who may not have computer skills or access to computers.
"As far as the information being available online, that's not going to help a lot of people we work with," said Max Richtman, executive vice president of the National Committee to Preserve Social Security and Medicare.
"This was a concrete piece of paper, a document that workers would receive that would give them confidence in the program," Richtman said. "Otherwise, they hear a lot of the debate in Washington. It's going to be there; it's not going to be there."
Claims for retirement and disability benefits are up significantly since the nation's economy soured in 2008. About 2.7 million people applied for retirement benefits last year, a 17 percent increase from 2008, according to agency statistics. About 3.2 million people applied for disability benefits last year, a 23 percent increase.
Since the 1980s, Social Security statements have been mailed each year to workers older than 25. They include a history of taxable earnings for each year — so people can check for mistakes — as well as the total amount of Social Security and Medicare taxes paid over the lifetime of the worker.
The statements provide estimates of monthly benefits, based on current earnings and when a worker plans to retire. Workers can claim early retirement benefits starting at age 62. Full benefits are available at age 66, a threshold that is gradually increasing to 67 for people born in 1960 or later.
The statements are mailed throughout the year, so many people have already received them this year. Tens of millions have not.
The agency does offer a benefits estimator on its website that Astrue said can be even more helpful than the annual Social Security statements. Workers can enter their Social Security numbers on the website and get estimates of future benefits, depending on when they plan to retire.
"You can go online and you can get a very accurate estimate of your likely retirement benefits," Astrue said. "You can run scenarios."
The website, however, does not provide the detailed earnings and payroll tax history that workers had been receiving in the mail each year.
Mary Johnson, a policy analyst at The Senior Citizens League, said the detailed paper statements help workers ensure they are getting credit for their proper earnings each year.
"When we get these we realize just how modest our benefit will be, and the need for savings, and to work as long as we are able to," Johnson said in an email.
Ending the statements is part of a trend in government to conduct more of its business electronically. Social Security already mails out few paper checks. About 88 percent of beneficiaries have their payments deposited directly into bank accounts.
Social Security has been beefing up its website in recent years, offering more services and information online as millions of computer-savvy baby boomers reach retirement age. The agency launched a new public campaign this week featuring two celebrities that baby boomers will find familiar: actors Patty Duke and George Takei.
Takei starred in the original "Star Trek" TV show, and the campaign features ads playing on a "Star Trek" theme, with Duke and Takei emphasizing how easy it is to apply for benefits online.
About 41 percent of applications for retirement benefits come in online, Astrue said. About 44 percent of Medicare applications are done online. In all, the agency's website attracts about 11 million visitors each month.
Sunday, April 3, 2011
Email-services firm reports data breach
Be careful opening any email from your banks or credit card issuers. Do not provide any private information over email unless you are absolutely sure you know the sender.
http://www.marketwatch.com/story/e-mail-services-firm-reports-data-breach-2011-04-03
Major financial-services, retail, hotel and other firms are affected
By Robert Daniel, MarketWatch
TEL AVIV (MarketWatch) – A data breach at the world’s largest provider of permission-based marketing-email services may have enabled unauthorized people to access the names and email addresses for customers of major financial-services, retailing and other companies, company statements and media reports say.
On April 1, Epsilon, the Dallas provider of email services for companies, said in a news release that on March 30, "A subset of Epsilon clients’ customer data [was] exposed by an unauthorized entry into Epsilon’s email system."
"The information that was obtained was limited to email addresses and/or customer names only. A rigorous assessment determined that no other personal identifiable information associated with those names was at risk. A full investigation is currently underway."
Companies including Walgreen Co., the Deerfield, Ill., drugstore chain; J.P. Morgan Chase & Co. and Capital One Financial Corp., the financial-services providers based in New York and McLean, Va., respectively; New York & Co., the New York apparel chain; and Kroger Co., the Cincinnati supermarket operator, said they were informed by Epsilon that files related to their customer bases might have been exposed.
SecurityWeek, which follows the Internet- and enterprise-security industry, reported that other companies affected by the breach included Citigroup and US Bancorp, the New York and Minneapolis financial-services firms, retailer Brookstone, consultants McKinsey & Co., the hotel chains Marriott International Inc. and Ritz-Carlton, and TiVo Inc., the Alviso, Calif., provider of digital-video-recording solutions.
A number of the companies warned their customers not to open email from unfamiliar senders and said that they don’t ask for personal information, like credit-card and Social Security numbers, via email.
On its website, Epsilon says that it employs more than 2,200 people worldwide and sends more than 40 billion emails annually on behalf of more than 2,500 clients, including 7of the top Fortune 10 companies. Epsilon is a subsidiary of Alliance Data Systems Corp., the Plano, Texas, provider of marketing solutions.
Robert Daniel is MarketWatch's Middle East bureau chief, based in Tel Aviv.
http://www.marketwatch.com/story/e-mail-services-firm-reports-data-breach-2011-04-03
Major financial-services, retail, hotel and other firms are affected
By Robert Daniel, MarketWatch
TEL AVIV (MarketWatch) – A data breach at the world’s largest provider of permission-based marketing-email services may have enabled unauthorized people to access the names and email addresses for customers of major financial-services, retailing and other companies, company statements and media reports say.
On April 1, Epsilon, the Dallas provider of email services for companies, said in a news release that on March 30, "A subset of Epsilon clients’ customer data [was] exposed by an unauthorized entry into Epsilon’s email system."
"The information that was obtained was limited to email addresses and/or customer names only. A rigorous assessment determined that no other personal identifiable information associated with those names was at risk. A full investigation is currently underway."
Companies including Walgreen Co., the Deerfield, Ill., drugstore chain; J.P. Morgan Chase & Co. and Capital One Financial Corp., the financial-services providers based in New York and McLean, Va., respectively; New York & Co., the New York apparel chain; and Kroger Co., the Cincinnati supermarket operator, said they were informed by Epsilon that files related to their customer bases might have been exposed.
SecurityWeek, which follows the Internet- and enterprise-security industry, reported that other companies affected by the breach included Citigroup and US Bancorp, the New York and Minneapolis financial-services firms, retailer Brookstone, consultants McKinsey & Co., the hotel chains Marriott International Inc. and Ritz-Carlton, and TiVo Inc., the Alviso, Calif., provider of digital-video-recording solutions.
A number of the companies warned their customers not to open email from unfamiliar senders and said that they don’t ask for personal information, like credit-card and Social Security numbers, via email.
On its website, Epsilon says that it employs more than 2,200 people worldwide and sends more than 40 billion emails annually on behalf of more than 2,500 clients, including 7of the top Fortune 10 companies. Epsilon is a subsidiary of Alliance Data Systems Corp., the Plano, Texas, provider of marketing solutions.
Robert Daniel is MarketWatch's Middle East bureau chief, based in Tel Aviv.
Sunday, March 27, 2011
Medicare rise could mean no Social Security COLA
http://news.yahoo.com/s/ap/20110327/ap_on_go_ot/us_social_security_cola
By STEPHEN OHLEMACHER, Associated Press
WASHINGTON – Millions of retired and disabled people in the United States had better brace for another year with no increase in Social Security payments.
The government is projecting a slight cost-of-living adjustment for Social Security benefits next year, the first increase since 2009. But for most beneficiaries, rising Medicare premiums threaten to wipe out any increase in payments, leaving them without a raise for a third straight year.
About 45 million people — one in seven in the country — receive both Medicare and Social Security. By law, beneficiaries have their Medicare Part B premiums, which cover doctor visits, deducted from their Social Security payments each month.
When Medicare premiums rise more than Social Security payments, millions of people living on fixed incomes don't get raises. On the other hand, most don't get pay cuts, either, because a hold-harmless provision prevents higher Part B premiums from reducing Social Security payments for most people.
David Certner of AARP estimates that as many as three-fourths of beneficiaries will have their entire Social Security increase swallowed by rising Medicare premiums next year.
It's a tough development for retirees who lost much of their savings when the stock market collapsed, who lost value in their homes when the housing market crashed and who can't find work because the job market is weak or they are in poor health.
"You just don't have the words to say how much this impacts a person," said Joyce Trebilcock, a retired legal secretary from Belle, Mo., a small town about 100 miles west of St. Louis.
Like most U.S. retirees, Trebilcock, 65, said Social Security is her primary source of income. She said a back injury about 15 years ago left her unable to work, so she applied for disability benefits. Now, she lives on a $1,262 Social Security payment each month, with more than $500 going to pay the mortgage.
"I've cut back on about everything I can, and I take the rest out of my savings," Trebilcock said. "Thank God I've got that. That's going to run out before long, at the rate I'm going. ... I have no idea what I'm going to do then."
Medicare premiums are absorbing a growing share of Social Security benefits, leaving retired and disabled people with less money for other expenses, according to a report by the Congressional Research Service.
Social Security recipients spend, on average, 9 percent of their benefits on Medicare Part B premiums, plus 3 percent on premiums for the Medicare prescription drug program. By the time someone retires in 2078, he or she will spend nearly one-third of their benefits on premiums for both Medicare programs, the report said. Also, when premiums for the prescription drug program increase, as they do almost every year, they can result in a pay cut for Social Security recipients.
"We could very well be entering a period where we're all stuck with flat benefits because of the growth in health care costs," said Mary Johnson, a policy analyst at The Senior Citizens League.
By law, Social Security cost-of-living adjustments, or COLAs, are determined each year by a government measure of inflation. When consumer prices go up, payments go up. When consumer prices fall, payments stay flat until prices rebound.
There had been a COLA every year from 1975 through 2009, when a spike in energy prices resulted in a 5.8 percent increase, the largest in 27 years. Since then, the recession has depressed consumer prices, resulting in no COLA in 2010 or 2011.
Older people might feel they are falling behind because they haven't had a raise since 2009, but many are benefiting, said Andrew Biggs, a former deputy commissioner of the Social Security Administration who is now a resident scholar at the American Enterprise Institute.
Consumer prices dropped, but Social Security benefits didn't drop, Biggs said. At the same time, health care costs went up, but Part B premiums stayed the same for most beneficiaries.
"They are better off because of that," Biggs said. "Somebody else is paying for a greater share of their health care. This will get me hate mail, obviously. But it is what it is."
Next year, the trustees who oversee the Social Security project a 1.2 percent COLA. President Barack Obama, in his spending proposal for the budget year that begins Oct. 1, projects a COLA of 0.9 percent. The average monthly payment is $1,077, so either way, the typical increase is projected to be between $10 and $13.
The current spike in energy prices could boost next year's COLA, if it lasts through September, when the increase for 2012 will be calculated. The COLA will be announced in mid-October.
Medicare Part B premiums must be set each year to cover 25 percent of program costs. By law, they have been frozen at 2009 levels for about 75 percent of beneficiaries because there has been no increase in Social Security. That means the entire premium hike has been borne by the remaining 25 percent, which includes new enrollees, high-income families and low-income beneficiaries who have their premiums paid by Medicaid, the federal-state health care program for the poor.
The 2009 premium levels, which are still paid by about three-fourths of beneficiaries, are $96.40 a month. Most of those who enrolled in the program in 2010 pay $110.50 a month and most of those who enrolled in 2011 pay $115.40.
The Medicare trustees project a Part B premium of $113.80 a month for next year. Obama's budget projects a monthly premium of $108.20, said Donald McLeod, a spokesman for the Centers for Medicare and Medicaid Services. McLeod cautioned that the projections could change significantly by September, when 2012 premiums are calculated.
Under either projection, a small share of beneficiaries would get lower premiums. The vast majority would get higher premiums that could swallow their Social Security COLA.
"That little raise helps us," said Estelle Jones, 66, of St. Paul, Minn. "Food, heating bills, water bill, all that stuff has gone up. ... All my medicines are very expensive, and every month I have to figure out how I am going to pay for them."
By STEPHEN OHLEMACHER, Associated Press
WASHINGTON – Millions of retired and disabled people in the United States had better brace for another year with no increase in Social Security payments.
The government is projecting a slight cost-of-living adjustment for Social Security benefits next year, the first increase since 2009. But for most beneficiaries, rising Medicare premiums threaten to wipe out any increase in payments, leaving them without a raise for a third straight year.
About 45 million people — one in seven in the country — receive both Medicare and Social Security. By law, beneficiaries have their Medicare Part B premiums, which cover doctor visits, deducted from their Social Security payments each month.
When Medicare premiums rise more than Social Security payments, millions of people living on fixed incomes don't get raises. On the other hand, most don't get pay cuts, either, because a hold-harmless provision prevents higher Part B premiums from reducing Social Security payments for most people.
David Certner of AARP estimates that as many as three-fourths of beneficiaries will have their entire Social Security increase swallowed by rising Medicare premiums next year.
It's a tough development for retirees who lost much of their savings when the stock market collapsed, who lost value in their homes when the housing market crashed and who can't find work because the job market is weak or they are in poor health.
"You just don't have the words to say how much this impacts a person," said Joyce Trebilcock, a retired legal secretary from Belle, Mo., a small town about 100 miles west of St. Louis.
Like most U.S. retirees, Trebilcock, 65, said Social Security is her primary source of income. She said a back injury about 15 years ago left her unable to work, so she applied for disability benefits. Now, she lives on a $1,262 Social Security payment each month, with more than $500 going to pay the mortgage.
"I've cut back on about everything I can, and I take the rest out of my savings," Trebilcock said. "Thank God I've got that. That's going to run out before long, at the rate I'm going. ... I have no idea what I'm going to do then."
Medicare premiums are absorbing a growing share of Social Security benefits, leaving retired and disabled people with less money for other expenses, according to a report by the Congressional Research Service.
Social Security recipients spend, on average, 9 percent of their benefits on Medicare Part B premiums, plus 3 percent on premiums for the Medicare prescription drug program. By the time someone retires in 2078, he or she will spend nearly one-third of their benefits on premiums for both Medicare programs, the report said. Also, when premiums for the prescription drug program increase, as they do almost every year, they can result in a pay cut for Social Security recipients.
"We could very well be entering a period where we're all stuck with flat benefits because of the growth in health care costs," said Mary Johnson, a policy analyst at The Senior Citizens League.
By law, Social Security cost-of-living adjustments, or COLAs, are determined each year by a government measure of inflation. When consumer prices go up, payments go up. When consumer prices fall, payments stay flat until prices rebound.
There had been a COLA every year from 1975 through 2009, when a spike in energy prices resulted in a 5.8 percent increase, the largest in 27 years. Since then, the recession has depressed consumer prices, resulting in no COLA in 2010 or 2011.
Older people might feel they are falling behind because they haven't had a raise since 2009, but many are benefiting, said Andrew Biggs, a former deputy commissioner of the Social Security Administration who is now a resident scholar at the American Enterprise Institute.
Consumer prices dropped, but Social Security benefits didn't drop, Biggs said. At the same time, health care costs went up, but Part B premiums stayed the same for most beneficiaries.
"They are better off because of that," Biggs said. "Somebody else is paying for a greater share of their health care. This will get me hate mail, obviously. But it is what it is."
Next year, the trustees who oversee the Social Security project a 1.2 percent COLA. President Barack Obama, in his spending proposal for the budget year that begins Oct. 1, projects a COLA of 0.9 percent. The average monthly payment is $1,077, so either way, the typical increase is projected to be between $10 and $13.
The current spike in energy prices could boost next year's COLA, if it lasts through September, when the increase for 2012 will be calculated. The COLA will be announced in mid-October.
Medicare Part B premiums must be set each year to cover 25 percent of program costs. By law, they have been frozen at 2009 levels for about 75 percent of beneficiaries because there has been no increase in Social Security. That means the entire premium hike has been borne by the remaining 25 percent, which includes new enrollees, high-income families and low-income beneficiaries who have their premiums paid by Medicaid, the federal-state health care program for the poor.
The 2009 premium levels, which are still paid by about three-fourths of beneficiaries, are $96.40 a month. Most of those who enrolled in the program in 2010 pay $110.50 a month and most of those who enrolled in 2011 pay $115.40.
The Medicare trustees project a Part B premium of $113.80 a month for next year. Obama's budget projects a monthly premium of $108.20, said Donald McLeod, a spokesman for the Centers for Medicare and Medicaid Services. McLeod cautioned that the projections could change significantly by September, when 2012 premiums are calculated.
Under either projection, a small share of beneficiaries would get lower premiums. The vast majority would get higher premiums that could swallow their Social Security COLA.
"That little raise helps us," said Estelle Jones, 66, of St. Paul, Minn. "Food, heating bills, water bill, all that stuff has gone up. ... All my medicines are very expensive, and every month I have to figure out how I am going to pay for them."
Friday, February 11, 2011
Tuesday, February 8, 2011
Obama Budget Proposes Broader Unemployment Taxes
http://online.wsj.com/article/SB10001424052748703507804576130890724243616.htm
By JONATHAN WEISMAN And DAMIAN PALETTA
WASHINGTON—President Barack Obama's budget proposal is expected to give states a way to collect more payroll taxes from businesses, in an effort to replenish the unemployment-insurance program. The plan could cause controversy at a time when the administration is seeking to mend fences with corporate America.
The proposal would aim to restock strained state unemployment-insurance trust funds by raising the amount of wages on which companies must pay unemployment taxes to $15,000, more than double the $7,000 in place since 1983.
The plan, which would take effect in 2014, could increase payroll taxes by as much as $100 billion over a decade, according to a person involved in its construction.
By proposing to enlarge the pool of wages subject to unemployment taxes, the White House appears to be offering states a more politically palatable way to raise revenues than to boost tax rates. States could keep the tax rates they have, or even lower them somewhat, and still raise considerably more revenue than they are raising now.
The unemployment insurance program is a joint federal-state program. The federal unemployment insurance tax rate of 6.2% on the new, larger base would be reduced, so that the U.S. would be taking in no more revenue than it does under the current system, a person familiar with the plan said.
To avoid hitting businesses with a tax increase during the economic recovery, the proposal would delay the new rules until 2014. The plan is expected to be included in Mr. Obama's budget proposal for fiscal 2012, to be released Monday.
Any proposal would need congressional approval.
State governments have had to borrow heavily from the federal government to cover the jobless benefits they provide. States are responsible for the first 26 weeks of benefits, and many have seen their reserve funds wiped out.
More than 40 states raised their unemployment-insurance payroll taxes last year to boost revenues.
The proposal comes as the White House is trying to improve relations with business groups while also pushing them for financial help to shore up the unemployment insurance system, drained by prolonged high joblessness.
Republican aides on Capitol Hill reacted warily. Increasing levies on businesses in the next few years could hit a wall of opposition among Republicans, said one senior G.O.P. tax aide in the Senate. Mr. Obama delivered a speech on Monday to the U.S. Chamber of Commerce, trying to repair frayed relations with business and offering areas of possible cooperation.
Mr. Obama has promised business an effort to simplify the corporate tax code while lowering the corporate tax rate. Pushing for higher unemployment taxes could reignite tensions.
—Sara Murray contributed to this article.
By JONATHAN WEISMAN And DAMIAN PALETTA
WASHINGTON—President Barack Obama's budget proposal is expected to give states a way to collect more payroll taxes from businesses, in an effort to replenish the unemployment-insurance program. The plan could cause controversy at a time when the administration is seeking to mend fences with corporate America.
The proposal would aim to restock strained state unemployment-insurance trust funds by raising the amount of wages on which companies must pay unemployment taxes to $15,000, more than double the $7,000 in place since 1983.
The plan, which would take effect in 2014, could increase payroll taxes by as much as $100 billion over a decade, according to a person involved in its construction.
By proposing to enlarge the pool of wages subject to unemployment taxes, the White House appears to be offering states a more politically palatable way to raise revenues than to boost tax rates. States could keep the tax rates they have, or even lower them somewhat, and still raise considerably more revenue than they are raising now.
The unemployment insurance program is a joint federal-state program. The federal unemployment insurance tax rate of 6.2% on the new, larger base would be reduced, so that the U.S. would be taking in no more revenue than it does under the current system, a person familiar with the plan said.
To avoid hitting businesses with a tax increase during the economic recovery, the proposal would delay the new rules until 2014. The plan is expected to be included in Mr. Obama's budget proposal for fiscal 2012, to be released Monday.
Any proposal would need congressional approval.
State governments have had to borrow heavily from the federal government to cover the jobless benefits they provide. States are responsible for the first 26 weeks of benefits, and many have seen their reserve funds wiped out.
More than 40 states raised their unemployment-insurance payroll taxes last year to boost revenues.
The proposal comes as the White House is trying to improve relations with business groups while also pushing them for financial help to shore up the unemployment insurance system, drained by prolonged high joblessness.
Republican aides on Capitol Hill reacted warily. Increasing levies on businesses in the next few years could hit a wall of opposition among Republicans, said one senior G.O.P. tax aide in the Senate. Mr. Obama delivered a speech on Monday to the U.S. Chamber of Commerce, trying to repair frayed relations with business and offering areas of possible cooperation.
Mr. Obama has promised business an effort to simplify the corporate tax code while lowering the corporate tax rate. Pushing for higher unemployment taxes could reignite tensions.
—Sara Murray contributed to this article.
Friday, February 4, 2011
Stock Sale Tax Rules Force Make-or-Break Choices
http://www.accountingtoday.com/news/Stock-Sale-Tax-Rules-Force-Make-or-Break-Choices-57187-1.html
BY ROGER RUSSELL, SENIOR EDITOR, ACCOUNTING TODAY
The new cost basis reporting rules won’t affect this year’s returns, but they are already in effect.
Beginning on Jan. 1, 2011, it became mandatory for brokers and other financial intermediaries to report cost basis information on Form 1099-B to investors and to the Internal Revenue Service for equities acquired on or after that date. The new requirements, spelled out in the Emergency Economic Stabilization Act of 2008, also will cover mutual funds acquired on or after Jan. 1, 2012, and debt securities, options and private placements acquired after Jan. 1, 2013.
The rules take aim at the practice of deciding after the fact what stock was sold where an investor holds different lots of the same stock, each with a different cost basis. For example, an investor holds three lots, with a cost basis of $40 for the first lot, $60 for the second lot, and $100 for the third lot. If shares are sold for $90, the investor might decide at a later date which ones were sold—those with a high cost basis, creating a loss, those with a medium cost basis, creating a small gain, or those with a low cost basis, creating a larger gain.
“Starting this year investors have to decide what they’re selling, and communicate this to the broker immediately,” said Stevie Conlon, CPA, Esq., senior director and tax counsel at Wolters Kluwer Financial Services. “You can’t do it later. You have to identify lots that were sold no later than the settlement date of sale. Before this, people would look at the stock they had sold at the end of the year or at the end of every month and determine which were the best lots to have sold.”
“The final regulations are clear that the taxpayer must select the lot that was sold no later than the settlement date, which would be the date of the trade plus three days,” she said. “This is probably what the law was before, but the law and the new regulations make it specific. In the old days it wouldn’t be obvious to the IRS that you changed something later. Now, the broker must issue a Form 1099-B for the stock sold this year that was bought after January 1 of this year.”
“Next February investors will receive a Form 1099-B showing the cost basis under that rule,” she said. “It will show the cost basis that was communicated to the broker by the settlement date, or the broker will be required to use FIFO. If what you put on your tax return doesn’t match, it will be obvious that you picked a different method after the fact. There will be taxpayers that are unsatisfied with both their broker and their tax adviser.”
This is a momentous issue due to the way that taxpayers normally interact with their advisers, Conlon indicated. “It requires getting tax advice on a recurring basis, almost in real time. That’s very different from an adviser’s normal involvement with a client at year-end planning sessions and tax return time,” she said. “Under the new rules, you’re locked in by whatever you select. It forces you to make an analysis about what’s the right lot to sell on an ongoing basis. The adviser has to be involved at the time of the trade, and that’s significant.”
Conlon advised tax preparers to explain the new rules to their clients during tax season, if they haven’t already. “The sooner you can educate your clients about the new rules, the better it will be at the end of the year,” she said.
BY ROGER RUSSELL, SENIOR EDITOR, ACCOUNTING TODAY
The new cost basis reporting rules won’t affect this year’s returns, but they are already in effect.
Beginning on Jan. 1, 2011, it became mandatory for brokers and other financial intermediaries to report cost basis information on Form 1099-B to investors and to the Internal Revenue Service for equities acquired on or after that date. The new requirements, spelled out in the Emergency Economic Stabilization Act of 2008, also will cover mutual funds acquired on or after Jan. 1, 2012, and debt securities, options and private placements acquired after Jan. 1, 2013.
The rules take aim at the practice of deciding after the fact what stock was sold where an investor holds different lots of the same stock, each with a different cost basis. For example, an investor holds three lots, with a cost basis of $40 for the first lot, $60 for the second lot, and $100 for the third lot. If shares are sold for $90, the investor might decide at a later date which ones were sold—those with a high cost basis, creating a loss, those with a medium cost basis, creating a small gain, or those with a low cost basis, creating a larger gain.
“Starting this year investors have to decide what they’re selling, and communicate this to the broker immediately,” said Stevie Conlon, CPA, Esq., senior director and tax counsel at Wolters Kluwer Financial Services. “You can’t do it later. You have to identify lots that were sold no later than the settlement date of sale. Before this, people would look at the stock they had sold at the end of the year or at the end of every month and determine which were the best lots to have sold.”
“The final regulations are clear that the taxpayer must select the lot that was sold no later than the settlement date, which would be the date of the trade plus three days,” she said. “This is probably what the law was before, but the law and the new regulations make it specific. In the old days it wouldn’t be obvious to the IRS that you changed something later. Now, the broker must issue a Form 1099-B for the stock sold this year that was bought after January 1 of this year.”
“Next February investors will receive a Form 1099-B showing the cost basis under that rule,” she said. “It will show the cost basis that was communicated to the broker by the settlement date, or the broker will be required to use FIFO. If what you put on your tax return doesn’t match, it will be obvious that you picked a different method after the fact. There will be taxpayers that are unsatisfied with both their broker and their tax adviser.”
This is a momentous issue due to the way that taxpayers normally interact with their advisers, Conlon indicated. “It requires getting tax advice on a recurring basis, almost in real time. That’s very different from an adviser’s normal involvement with a client at year-end planning sessions and tax return time,” she said. “Under the new rules, you’re locked in by whatever you select. It forces you to make an analysis about what’s the right lot to sell on an ongoing basis. The adviser has to be involved at the time of the trade, and that’s significant.”
Conlon advised tax preparers to explain the new rules to their clients during tax season, if they haven’t already. “The sooner you can educate your clients about the new rules, the better it will be at the end of the year,” she said.
Thursday, February 3, 2011
Senate Passes 1099 Repeal Amendment
The Senate approved an amendment Wednesday to repeal the expanded 1099 information reporting requirements in the health care reform law. For more information, read http://www.accountingtoday.com/news/Senate-Passes-1099-Repeal-Amendment-57177-1.html
Subscribe to:
Posts (Atom)