How you can resist funding the government →
about the IRS and U.S. tax law/policy →
how is tax law/policy/administration changing? →
health insurance tax deduction
And if something has to go, something else has to inflate to fill its gap:
In this case, highway funding.
The White House budget allocated $256 billion over six years for highway funding.
That didn’t last long in the Red-ink Republican Congress — the Senate just passed a bill more than $50 billion fatter.
(The version of the bill being prepared in the House is another $50+ billion fatter than that!)
Interesting post.… engaged in a bit of direct action there, yourself, it seems.…
violating social conventions to actually discuss a method of non-violent civil disobedience.
If a meeting advertises for revolutionaries, it should not be surprised when at least one shows up.
You could still be a wingnut, but such people are often useful, and do not forget your “history of the demise of slavery postings.”
All that change probably required a wingnut or two to leaven things.
Yes, you are a wingnut, and yes you accurately and meaningfully challenged to idiocy with which you were faced at the New College panel.
Isn’t it possible for both choices to be true at the same time?
I wasn’t about to sit through the state of the union balderdash, but a little bird told me that Dubya floated something that could help those of us trying to eliminate our income tax bills by keeping our income low:
I ask Congress to move forward on a comprehensive health care agenda with tax credits to help low-income workers buy insurance…
Health Savings Accounts, as I’ve mentioned before (see , , , , , , and ), are a great way for the low-income tax resister to shield a little more hard-earned money from the IRS.
Republicans met “Cover the Uninsured Week” on by pushing several stalled enhancements for health savings accounts (HSAs) and introducing a new but potentially expensive tax credit for health insurance.
Rep. John B. Shadegg, R-Ariz., introduced the Patients’ Health Care Reform Act, which would allow all Americans a refundable tax credit for purchasing health insurance.
“Refundable” tax credits are ones like the Earned Income Tax Credit, in which you can get a credit that exceeds the tax you owe, so that the government ends up owing you money at the end of the year (most other tax credits only allow you a maximum credit equal to the tax you owe).
Rep. Eric Cantor, R-Va., asked Congress to move H.R. 1872, which would allow HSA holders to take an above-the-line deduction for the cost of their insurance premiums.
That’d be nice.
I had been under the impression that you could pay your insurance premiums from your HSA deposits, which turns out not to be the case.
For me, this isn’t so much of an issue:
I get to deduct my health insurance premiums anyway because I’m self-employed. But for other folks who use HSAs, this change would certainly help.
The IRS has announced that employees can defer from their paychecks pre-tax the cost of individual health insurance.
That is, the employer health exclusion does not simply apply to employer-sponsored plans.
Employers can either directly-reimburse employees for part or all of the plan cost, or can allow the employees to take a pre-tax deduction from their paycheck.
Congress just passed another bill, which the President is expected to sign
into law. It has a number of tax provisions, some of which may affect those
of us who are using The
DON Method of
tax resistance.
Most exciting to me is that the bill permits sole proprietors to deduct their
health insurance premiums as a business expense. Formerly such folks could
take a deduction, but only after calculating business profits. The
significance of this is that now the deduction reduces our
profitability/income and therefore both our income tax and our
SECA (social security & medicare) tax.
The old way, it could reduce our income tax but we still were charged
SECA on the income.
This makes sole proprietors more like employees whose employers provide health
benefits. Those benefits don’t typically count as income and so neither the
employer nor the employee gets charged taxes on them.
Unfortunately, Congress being Congress, it was only willing to enact this new
provision temporarily. It officially applies only to the
tax year. But now that the precedent has
been established, it will probably get rolled into one of the yearly extenders
packages.
Other provisions of the new bill:
Raises the §179 depreciation limit from $250,000 to $500,000 and extends
the 50% bonus depreciation option for another year.
Allows new businesses to deduct $10,000 in start-up costs (that otherwise
would have to be depreciated); the limit had been $5,000.
Expands the favored tax treatment of C corporation capital gains.
Allows some small business taxpayers to shift certain tax credits back
into the five previous years and to use them even if the Alternative
Minimum Tax would otherwise apply.
Expands the new “if you pay $600 or more to anyone you have to file a
1099-MISC with the government about it” policy
so that it applies to landlords.
Some bits and pieces from here and there:
The New York Times profiles nonviolent resistance scholar Gene Sharp, who developed the training and resources that have been drawn on by activists in the recent Egyptian and Tunisian revolts, among others.
Speaking of nonviolent action, I notice that the War Resisters’ International pamphlet on Training for Nonviolent Action is now freely available on-line.
Do you pay Medicare Part B health insurance premiums?
Are you self-employed?
If so, the IRS has never let you take this expense as a self-employed health insurance expense, like the rest of us with ordinary health insurance can.
But now they’ve abruptly, and without much fanfare, changed their minds.
Obama’s new budget increases military funding (the Pentagon budget “cuts” you may be reading about in the press aren’t actual cuts but reductions in the previously anticipated budget increases — like claiming you got a pay cut at the end of the year because you only got a 10% raise and you were hoping for 15%), includes more money for the IRS, and increases funding for the War on Drug Users.
It probably cuts some program you like, though.
Metaphorically, the Obamacare page is still loading and its icon looks like it’ll be spinning for a while yet, but I’m ready to share a very preliminary evaluation at how it interacts with my low-income tax resistance method.
In summary: the news so far is good.
It looks like I will be able to have a high-deductible health insurance plan that allows me to continue to contribute to a tax-advantaged Health Savings Account.
My strategy of keeping my adjusted gross income (AGI) below a certain threshold in order to avoid income tax has the side-effect of qualifying me for the maximum subsidy: I will be paying next-to-nothing (a token dollar per month) for this insurance.
Here are some observations and questions I’ve come up with along the way.
The law is complex and confusing and they’re still tweaking it, so don’t take any of this as gospel:
As a self-employed person, I’ve been permitted to take the cost of my health insurance premium as an “above-the-line” deduction on my 1040 (that is, a deduction that has the effect of lowering my AGI).
Because of this, although my premium is going from $2,500+ in 2013 to $12 in 2014, this won’t translate to any extra spending money for me as it wasn’t money I was spending out of my post-tax income anyway.
However, I’ll need to bring in $2,500 less income next year to meet my over-all expenses.
In other words, I’ll be able to maintain the same standard of living while having to work for $2,500 less income.
The way the insurance premium subsidy works is a sort of Rube Goldberg machine centered on the federal income tax, and it goes a little something like this:
The health insurance premium subsidy is implemented as a tax credit that is based on the premium amount and on your AGI.
If your AGI is low enough, some or most of your premium is paid by the government (or, if it’s even lower, you may be shuffled into Medicare).
Instead of making you pay for your insurance throughout the year and then giving you a big credit when you file your taxes the following year, the government parcels this credit out to you indirectly — by paying it to your insurance company in lieu of that portion of your own payment.
But you don’t know what your AGI is going to be for 2014 until you fill out your taxes in 2015, so you have to play a guessing game.
When you do file and learn what your real AGI was, you also find out what your credit should have been for the year.
If the government oversubsidized you, you’re supposed to pay it back; if you paid more than you had to, the government should issue you a refund.
But there are a number of restrictions on the government’s ability to collect any overpaid subsidies: the amount that the government can demand that you return has an absolute cap on it, and the IRS is prohibited by the law from using almost all of its usual measures for recovering tax debts to go after this specific sort of delinquency.
Since all the tax amounts are going to be mixed up on the 1040 and come out as one number at the end, I expect that the agency is going to have a hell of a time figuring out how to take enforcement actions against people whose tax debts are mixtures of overcredited Obamacare premiums and resisted income taxes.
(Hint, hint.)
I think I may have had this last point wrong.
I have heard since that the absolute caps are only for people at low income levels: so that if you qualify for a subsidy, but the subsidy you actually received was higher than what you qualify for, you might not have to repay the complete difference between the two amounts; however, if you don’t qualify for a subsidy but you got one anyway, you can be required to pay back the full amount.
Also: I think the restrictions on the IRS’s ability to use its enforcement measures against you may be restricted to its efforts to retrieve the amount of the tax penalty for not having health insurance at all, and that it may use all of its usual measures to try to recover over-paid subsidies.
Again, the details of the law remain fuzzy to me, and I read a lot of contradictory things about it, so I’m piecing it together.
So wait a minute: The government is going to keep paying to subsidize my health insurance at the same time that they’re trying to chase me down for (last I counted) $26,000+ I’ve refused to pay them?
Seriously?
Apparently so.
I have heard of no mechanism for withholding subsidies from people with tax debts.
Perhaps if I foolishly applied for the subsidies as a tax credit on my 1040 instead of applying for the government to use the subsidy to cover my monthly premium, the IRS would seize the refund and apply it to what they’re trying to extract from me, but they don’t seem to have any interest in interrupting the payments if I apply in the normal way.
I anticipate at some future date, despicable leeches like myself will be subject to some sort of two-minute hate and Congress will cut us off in a flurry of righteous hearings and outraged pontifications.
That might make this good news turn to bad news, as I then will be on the hook for the full premium of what I wouldn’t be surprised to find would be an inferior and more expensive product than I have now (keeping my present insurance plan was not an option as it’s being canceled at the end of the month).
For those of you who are signing up for health insurance in this period of flux, I recommend that you seriously consider a plan that allows you to contribute to a Health Savings Account.
Such plans usually have higher deductibles, so you have to be comfortable with that, but Health Savings Accounts are a good way to shield a good hunk of your income from federal income tax.
