“Thus, outside opinions would
not protect a taxpayer from the
penalty if the transaction lacks
economic substance,” he said. “It
will require professionals to be very
careful in dealing with transactions
that are not standard fare. They will
have to really look and understand
if they are at risk.”
Obamacare
FROM PAGE 10
effect until at least next year, and
the provisions that would require
most individuals to carry coverage
will not take effect until 2014. There
will be time to understand how it
affects us both as individuals and
businesses.”
Meanwhile, court challenges, fu-
ture elections and legislation may
play a role in the ultimate imple-
mentation of the law. “At least 13
states have filed to contest the con-
stitutionality of requiring individu-
als to carry coverage,” said Schafer.
“The thinking is that the federal gov-
ernment is overstepping its bounds,
and that it’s an issue that is up to the
states to determine. By 2014, por-
tions of the bill could be repealed
before they take effect.” AT
REPORTING REQUIREMENTS
The business-payment reporting
requirement under the new law, effective for payments of more than
$600 after 2011, extends the obligation under current law to report
payments to corporations as well
as individuals. The act also expands
the kinds of payments subject to
reporting to include the amount of
proceeds paid in consideration for
property or services.
“This might be especially burden-
some for smaller and medium-sized
organizations,” said Stretch. “It dra-
matically increases the number of
information returns that businesses
and CPAs themselves have to file.”
Henry Paula, a tax principal with
the Reznick Group PC, believes it is
unnecessary for CPAs to advise cli-
ents on the medical plans and cov-
erage requirements of the new law:
“What we can do is talk about the
tax pieces that will impact them.”
To that end, he suggests that high-
income clients consider taking less
in wages in return for more distribu-
tions of each year’s taxable income
to avoid much of the increases in
Medicare taxes. “They should also
ensure that the maximum is con-
tributed on a pre-tax basis to 401(k)
and other qualified plans from an-
nual wages, since these portions of
wages are not subject to Medicare
tax,” he said. “And bonuses should
be paid prior to 2013 to withhold as
much as feasible and justifiable un-
der the circumstances and reduce
the portion subject to the increased
Medicare tax.”
TAKE CHECKPOINT® FOR A TEST DRIVE.
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DATES STILL UNCERTAIN
One of the positives about the act is
the fact that most of the provisions
have delayed effective dates, according to Brenda Schafer, manager
of tax analysis at the Tax Institute at
H&R Block: “Just a few are effective
now, such as the adoption credit
and the small-business credit. Everything else doesn’t start to take
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