Factbox: U.S. IRS still has long to-do list on Obama health law

WASHINGTON Fri Sep 27, 2013 1:01am EDT

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WASHINGTON (Reuters) - As the sweeping new U.S. healthcare law takes hold, the Internal Revenue Service and the Treasury Department are working on a long list of jobs to help implement "Obamacare."

The IRS is playing a major part in rolling out President Barack Obama's new insurance system, meant to help millions of uninsured Americans obtain adequate healthcare coverage.

While congressional Republicans fought to dismantle the law, the Obama administration said on Thursday government insurance exchanges for individuals will open on October 1 as scheduled.

But the White House also said it will delay online Obamacare enrollment for small businesses in federally operated healthcare exchanges until November 1, one month later than planned.

In addition, it said the Spanish-language component of online insurance exchanges will not be ready for operation by October 1, but will come online "sometime in October."

There have been other delays, as well. In July, the administration postponed by a year a rule that large employers offer health insurance to employees or pay a fine to the IRS.

Here are some of the major Obamacare tasks facing the IRS and the Treasury Department.

EMPLOYER MANDATE

This provision says that any business with 50 or more full-time employees must offer affordable coverage to employees, or pay $2,000 to the IRS for each full-time employee not offered coverage, excluding the first 30 employees.

Businesses would face the same tax if coverage they offer is unaffordable or falls short of "minimum essential" levels.

The Treasury Department said in July that the "employer mandate" will not take effect until 2015, postponed from 2014.

With questions still pending on how the mandate will work, the IRS proposed rules last year and held a hearing in April.

REPORTING REQUIREMENTS

As part of the employer mandate delay, Treasury said new reporting rules for businesses with more than 50 full-time workers will be voluntary in 2014.

The IRS in September issued proposed rules to ease some of these requirements by, in some circumstances, reducing demands on employers for information about the full-time status of their workers and the specific costs of health plans.

ADDITIONAL 0.9 PERCENT PAYROLL TAX

Starting this year, high-income earners began paying an additional 0.9 percent payroll tax on incomes over $200,000 for individuals and $250,000 for couples. That came on top of the current payroll tax, which goes toward funding Medicare federal health insurance for the elderly and disabled.

The IRS has proposed rules that explain how to calculate the tax and report a tax liability.

UNEARNED INCOME 3.8 PERCENT TAX

Also this year, there is a new tax on investment income, such as capital gains and dividends. The 3.8 percent levy is on top of a current 20-percent tax for high-income groups.

Well-off taxpayers await instructions from the IRS on the form they will need to fill out. One issue is whether someone is "actively" involved in a business and so not subject to the tax, said David Kautter, tax professor at American University's business school.

The IRS has proposed rules for the tax and held a hearing in April.

LIMITS ON DEDUCTIONS FOR COMPENSATION

The healthcare law caps tax deductions for certain employers providing health insurance at $500,000 per employee for all current employees. This provision took effect in 2013. In some cases of deferred compensation, it could reach back to 2009.

Final regulations are still pending from the Treasury Department. Proposed regulations were issued in April 2013.

FEE ON HEALTH INSURANCE PROVIDERS

Under the law, the government will collect annual fees from health plans, raising $8 billion in 2014 and ramping up to $14.3 billion in 2018. Subsequent years' fees will be based on premium growth. Treasury issued proposed rules in March 2013.

'CADILLAC' TAX

This is a tax of 40 percent of the value of health plans above levels considered expensive. The tax, imposed on the insurer, is based on the value of plans with coverage costing more than $10,200 in benefits for individuals and $27,500 for families. This tax is a long way off, effective in 2018.

INDIVIDUAL MANDATE

Starting in 2014, most Americans must have health insurance or pay a fee to the IRS. Proposed rules for this were released in January. A public hearing was held on May 29.

The fee will be $95 per year, or 1 percent of taxable household income, in 2014; rising in phases by 2016 to $695 per person, with a cap of 2.5 percent of household income.

Final rules were issued in August of this year.

PREMIUM TAX CREDIT

Also starting in 2014, a tax credit will be available to low- and middle-income individuals for health insurance premiums paid, based on a percentage of income.

The credit is meant to help them pay for obtaining coverage in insurance marketplaces being set up by the states and federal government. The IRS finished the rules for this in May 2012.

(Editing by Kevin Drawbaugh and Mohammad Zargham)

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