H&R Block Inc. is warning that individuals, employers and tax preparers will need time to read and comply with the Patient Protection and Affordable Care Act (PPACA) tax rules that are supposed to take effect in 2014.
Kathy Pickering, a vice president at a policy affiliate of H&R Block, Kansas City, Mo., said today in Washington at a PPACA implementation hearing that her company would like to see the Internal Revenue Service (IRS) and other agencies complete the regulations and other documents that taxpayers need to figure out the 2014 PPACA rules by April 30, 2013.
Subcommittee staffers note in the hearing announcement that PPACA contains at least 47 tax provisions. Provisions that will impose taxes on some individuals who fail to own coverage and some employers that fail to provide health benefits have attracted the most attention.
Other tax provisions include a new 3.8% tax on investment income, a new Medicare payroll tax, and a new health insurance premium subsidy.
The IRS certainly has published many regulations and many batches of the informal “guidance” that taxpayers need to comply with the PPACA tax provisions, Pickering said at the hearing, which was organized by the House Ways and Means Committee’s oversight subcommittee.
But the IRS cannot wait until 2014 to release the rest of the documents that taxpayers need to get started, Pickering said, according to a written version of her testimony posted by the oversight subcommittee.
Any delays could be especially hard on the owners of small businesses, Pickering said.
Pickering told lawmakers that H&R Block itself is a franchisor and communicates with the franchisees — who are mostly small business owners — daily.
Business owners try to set up their benefits packages at least 3 months before the end of the year, and open enrollment in a state PPACA Small Business Health Options Program (SHOP) — a new, Web-based health insurance supermarket for small businesses — is supposed to start Oct. 1, 2013, Pickering said.
“This means small businesses will need, at a minimum, 4 months to plan for 2014 and to determine if they intend to participate in a SHOP,” Pickering said.
Fred Goldberg Jr., a lawyer who was the IRS commissioner from 1989 to 1991, said he believes the government can reduce the odds that PPACA will create an administrative quagmire for individuals by giving the IRS adequate funding and having the IRS determine whether individual taxpayers qualify for the new PPACA health insurance purchase tax subsidies that are supposed to go to moderate-income taxpayers.
Families must provide 2 years of tax return information to see whether they qualify for the subsidies.
“The only thing we know for sure is that 2-year-old tax return information is virtually certain to be wrong,” Goldberg said. “That is because — in the real world — the only constant is change.”
Families will have to communicate with exchanges often to deal with problems resulting from the fact that children have grown up or parents have been promoted, demoted or fired, Goldberg said.
“Do not give the exchanges responsibility for determining the amount of tax credits that individuals and families are entitled to receive,” Goldberg said. “This will not be part of their core competency, and there is no reason it should be.”
The IRS is much better equipped to make the determinations, Goldberg said.
Another witness, Seth Perretta, who represented the American Benefits Council, Washington, said the IRS has taken a thoughtful, collaborative approach to implementing PPACA.
The benefits council represents the interests of large employers and large benefits providers.
The IRS and its parent department, the U.S. Treasury Department, has helped the council put on PPACA compliance webinars and used webinars of their own to get information about employers’ challenges, Perretta said.
The IRS has released interpretations on health benefits tax requirements and other requirements that show it is taking employers’ suggestions seriously, Perretta said.
Employers and their advisors still need guidance on reporting and disclosure obligations, efforts to calculate whether health benefits meet new PPACA “minimum value” requirements, and efforts to mesh wellness programs with PPACA benefits value requirements, Perretta said.