For some, the news marks the end of a three year journey; for others, the trek was more like eight years. For all, it’s an accomplishment worth celebrating.

As is the case for those individuals who will be taking an oath as attorneys on September 20, there will be a number of changes for the Dwyer Law Firm in the coming weeks.

Once again, congratulations for a job well done, Lee!

As explained in a previous post, beginning on January 1, 2012, the healthcare overhaul signed into law by President Obama made a number of changes to the tax laws.

According to the NTA report, the new 1099 reporting requirement “would apply to businesses of all sizes, charities and other tax-exempt organizations, and government entities,” including:

• 26 million non-farm sole proprietorships;
• 4 million S corporations;
• 2 million C corporations;
• 3 million partnerships;
• 2 million farming businesses;
• 1 million charities and other tax-exempt organizations; and
• probably more than 100,000 federal, state, and local government entities.

Unfortunately, as the IRS website notes, the report of the National Taxpayer Advocate states that the 1099 reporting burdens “may turn out to be disproportionate as compared with any resulting improvement in tax compliance.”

According to a summary of National Taxpayer Advocate report to Congress, the IRS is not answering its phone as often as it used to.

In fiscal year 2008, the IRS only answered 53% of its calls from taxpayers seeking assistance. Back in fiscal year 2004, the answer rate hit its peak at 87%. The goal for the current fiscal year is 71%.

While you are waiting patiently, try to enjoy the music.

The most onerous of these duties have yet to take effect and Ms. Olson doesn’t like what she sees.

According to the summary, the NTA report “expresses concern that the IRS currently is neither structured nor funded to … effectively” deliver social programs. This is especially bad news considering that President Obama’s healthcare overhaul is “the most extensive social benefit program the IRS has been asked to implement in recent history.”

Apparently, enforcing the Obama Administration’s new healthcare tax will “involve nearly every division and function of the IRS,” according to Ms. Olson.

As one might have guessed, the NTA report indicates that the IRS will need more funding in order to carry out its new responsibilities.

As a new member of the BIA, the Firm is looking forward to working with the staff and members of the Association and hopes to be a resource for the business owners and professionals of the building industry.

For a list of upcoming events sponsored by the BIA, visit the Events page of the BIA website or call the BIA office at (575) 526-6126.

Professor James Duane graduated from Harvard Law School, practiced criminal defense, and now teaches Trial Practice, Evidence, and other subjects at Regent University School of Law, where he delivered this lecture.

For more information on Professor Duane, check out his Faculty Profile.

Starting January 1, 2012, business owners will be required to file additional paperwork with the IRS and send an IRS Form 1099 to any company or individual that receives more than $600 for goods or services sold to the business annually.

Included in the health care overhaul bill that was signed by President Obama, the small provision could have a big impact on businesses. The administrative burden of collecting the necessary information, including the vendor’s tax identification number, filling out the required paperwork, and verifying accuracy of the information could cost businesses thousands of dollars each year.

According to a recent article by Neil deMause on CNNMoney.com, the new tax provision “means businesses will have to issue millions of new tax documents each year.” Click here to read the full article.

The requirement was added to the health care overhaul bill as a “revenue raiser.” In addition to offsetting some of the costs of implementing the new changes in the American health care system, this “revenue raiser” was a way for the federal government to increase tax revenues without raising tax rates on corporations or individuals. Members of Congress were able to support the new tax-related change in the law without paying the political price of voting for a new tax or a tax increase.

Taxed, if the taxpayer falls under the new Medicare tax on investment income scheduled to take effect in 2013.

Under § 1411 of the Internal Revenue Code, a new tax of 3.8% is imposed on net investment income of certain individuals, trusts, and estates.

For individuals, the tax is assessed on either net investment income or the excess of modified adjusted gross income (MAGI) over the threshold amount, whichever is less. For a married couple filing jointly, the threshold amount is $250,000; for a married person filing a separate return, the threshold amount is $125,000; for everyone else, the threshold amount is $200,000.

The new tax only applies to an individual if his or her income exceeds the threshold amount, as explained in the following examples.

EXAMPLE A

• A single taxpayer in 2013 with a MAGI of $150,000 and net investment income of $60,000 will not be subject to the new tax because the MAGI is under the threshold amount.

EXAMPLE B

• A married couple filing a joint return in 2013 with a MAGI of $375,000 and net investment income of $100,000 would be taxed on $100,000 because the net investment income is less than $125,000 (the excess of the MAGI over the threshold).

While the tax should not apply to tax-exempt bond interest, it could apply to gain from the sale of a principal residence if the gain exceeds the amount of the deduction allowed under §121 ($250,000 for individuals or $500,000 for married couples filing jointly) or if the gain is from the sale of a vacation home.

The 3.8% tax is also imposed on certain income of trusts and estates.

As one might have guessed, there are additional applications and exemptions, as well as some important statutory definitions (net investment income, MAGI, and AGI for starters). The bottom line is that overhauling healthcare is expensive ($115 billion more expensive than originally thought, according to the Congressional Budget Office) and someone has to pay for it.

Under current law, the 2.9% Medicare payroll tax is split evenly between the employer and employee with each paying 1.45%. Under the law passed by Congress and signed by the President, beginning in 2013, employees will have to pay an additional 0.9% tax on the amount of wages over $200,000 for individuals and $250,000 for couples.

One of the simplest and most immediate consequences of the 2010 Health Care Act is the new tax on indoor tanning.

Effective July 1, all indoor tanning facilities will be required to collect a 10% excise tax on the amount paid for tanning services, according to Section 10907 of the Act.

While this particular method of funding the health care overhaul appears to be minimally invasive and essentially voluntary as a person can choose to participate in the taxed activity, other methods of footing the bill for the Health Care Bill are more complex and more costly.

Additionally, it’s hard to tell if Congress intended this to be a means of raising some of the revenue necessary for the overhaul or if it was an attempt to send a message to the American public that Congress disapproves of indoor tanning, much like it cigarettes.

Several more tax aspects of the law will be discussed in the near future.