Forget 'Keep Your Plan' And The Website, #Obamacare Taxes Are Worse http://t.co/eiXSfTMsPG via @forbes
— U.S. Citizen Abroad (@USCitizenAbroad) January 7, 2014
Forget for a moment that the Affordable Heath Act resulted in the confiscation of the health plans of some individuals. That is only of the lies of Obamacare.
You will recall that the Supreme Court of the United States upheld the constitutionality of Obamacare on the basis that it was a tax! In fact Obamacare contains hidden taxes (penalties for failure to comply) and many visible taxes.
Robert Wood describes what a massive tax The Affordable Health Act AKA Obamacare really is:
As with many tax laws–and on many fundamental levels, the Affordable Care Act is a tax law–determining exactly where the tax burden falls isn’t always clear. One of the new taxes funds the Patient-Centered Outcomes Research Institute (PCORI). (I wish this institute included “affordable” for it makes a better acronym.) This 2% levy on health plans is expected to collect a cool $8 billion this year alone.
By 2018, annual receipts from the little 2% climb to $14.3 billion. Over a decade, it reaps over $100 billion. Here comes the zinger. Self-insured employers (public companies and 4 of every 5 employers with over 500 employees) don’t have to pay it, according to IRS rules. Oh, but the health plans pay it, right?
That is the Obama administration’s official position. In fact, though, as is plainly no surprise, the insurers pass it along to those who pay the premiums. And that means small employers and people who buy their own insurance have to pay. This is one of the worst features of the new law.
The little guy–small business and the self-employed–have to pay. Kaiser Health News said the new taxes end up on customer bills. One customer’s bill went up by $23.14 a month, or $277.68 annually, for the tax. It meant the person’s monthly premium rose from $322.26 to $345.40.
It continues to be unclear how Obamacare will affect Americans abroad.
This article and the comments are well worth a read.
I would be disappointed were IBS to lose focus and become embroiled in Affordable Care Act issues except to the extent (the tax on their unearned income) that they involve US persons abroad.
I don’t think this will get IBS embroiled in ACA, but since Robert Wood is a regular commentator on FATCA and Expat issues, I do agree, that the story on the taxes was fascinating. Also, this was a barn burner for him in terms of comments. His FATCA stories get very few comments, but this one got over 500 comments and was viewed a quarter of a million times!! It was worth a comment, and I agree with @USCitizenAbroad, it was worth the read.
Yes, it was interesting and I note as well that on the unearned income tax issue, there are questions surfacing about the availability of tax credits and a typically waffling IRS position that shows very clearly no one ever even thought about the implications for US persons resident abroad before they decided the tax did apply.
I read an article that said the Medicare surtax does impact USC’s aboard. Only non-resident aliens are exempt. This differs from what we have been told in the past.
So while the law requiring health insurance does not impact us, the taxing of us to float their system seems to.
I see FATCA, the Tax issues and the ACA (aka Obamacare) in the same light. It all comes down to enslavement of the people by the Politburo and their inner circle. Sell them poison whilst calling it sweets.
500+ comments, amazing. I was beginning to think no one but us read his column by the number of comments generated by his FATCA coverage.
@yoga girl
I’m working on getting the BC Real Estate Association to post in their realtor’s bulletin information on the tax responsibilities of US persons on the sale of their principal residence. I used to be a realtor and had I known about CBT, my life would not be the same as it is today and could have saved others a lot of grief had I known. To think things could be even worse for hapless home owners under the Affordable Care Act!
While the US Supreme Court ruling confirms Obamacare is a tax, I agree with other Brokers let’s not get distracted. For me the whole US Healthcare situation and having to pay insurance premiums was always a tax because a sensible person would take the view you can’t really get on without health coverage. Only the selfish who want to push their own healthcare costs onto others would take the view Obamacare is wrong. They don’t have the right to lump the taxpayer with healthcare bills unless they’ve made the prescribed contribution into the system wherever you live in the world.
FATCA for me is all about your rights as a ‘local’ citizen and not allowing your ‘local’ government to sign IGAs for some sort of legally data discrimination against US born dual / local citizens. What if China passed a law wanting everyone’s medical records across the world or it will slap a 30% tariff on any country who refuses. The reaction would be predictable. Why is FATCA so hard for Homelanders and other to understand?
@qm, I don’t think we’re being sidetracked. There are simply useful parallels and warnings from watching Obamacare unfold. Also it is another huge complex ill defined project that was handed over to the IRS to implement yet it is not really its core mission.
We barely escaped being subjected to the Obamacare tax except that at the last minute we were exempted due to dedicated lobbying by ACA (American Citizens Abroad) and FAWCO, and AARO, etc. No exemption from the associated investment tax though http://americansabroad.org/issues/taxation/foreign-tax-credits-and-new-medicare-tax/ .
I think that we see parallels in terms of the way in which expats are included in these US domestic obligations in order to fundraise and pay for US homeland benefit only, regardless of how absurd or how unfair the result and the negative impact on those living and paying taxes abroad. And, Obamacare does NOT help those living abroad who might want to buy into it as it does not provide any benefits abroad http://americansabroad.org/issues/healthcare/ .
Also, the snafus with the implementation are a foreshadowing of what will happen with the FATCA Mordor portal. But since we and the ‘foreign’ banks don’t have any interested political representation in the US, there is no recourse if it all goes wrong. Obamacare gets lots of coverage from all sorts of angles and media outlets in the US, but FATCA’s impact on expats is not of interest to many – in the US or in our home countries. Yet all of our assets are at risk – as well as the assets of our non-US joint account holders.
@Don…
I agree with Badger….
This is not a debate about ObamaCare, so not a distraction imho, other than to point out the impacts of every new bit of legislation that issues forth from DC that has new taxes (somewhat hidden) attached. These taxes impacts Americans living abroad if they are trying to be CBT compliant yet receive NO benefit.
The IRS has confused a lot of people in their FAQs on the Individual Shared Responsibility Provision of the Affordable Care Act (ACA). Bona fide foreign residents are exempt from the ACA penalty on health insurance. However since the issuance of the FAQs by the IRS, two people, who are bona fide foreign residents, have called me in a panic because they plan to spend six weeks in the US and read the FAQ as if they have to pay a penalty beause they will be in the US for more than 35 days. See Question 12 in the following IRS FAQs.
http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision
The FAQ should state clearly state that Bona Fide Residence abroad or Physical Presence of 330 days abroad within a 12 month period exempts one from the ACA penalty. The wording about living abroad for a year should be changed to something like “U.S. citizens with Bona Fide foreign residence as defined in Publication 54, or who have lived abroad for a calendar year (or at least …)”
Specifically, the answer to Question 12 states:
12. Are US citizens living abroad subject to the individual shared responsibility provision?
Yes. However, U.S. citizens who live abroad for a calendar year (or at least 330 days within a 12 month period) are treated as having minimum essential coverage for the year (or period). These are individuals who qualify for an exclusion from income under section 911 of the Code. See Publication 54 for further information on the section 911 exclusion. They need take no further action to comply with the individual shared responsibility provision.
The way that the FAQ reads write now has people freaking out as they are reading it as if they must pay the penalty if they are U.S. citizens resident abroad and they visit the US for more than 35 days. Bona fide residence abroad allows you to be in the US for more than 35 days.
Bona fide residence is defined in Publication 54 as:
Bona fide resident for part of a year. Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you are a bona fide resident of that country for the period starting with the date you actually began the residence and ending with the date you abandon the foreign residence. Your period of bona fide residence can include an entire tax year plus parts of 2 other tax years.
It is a simple correction? Who does one complian to in the IRS that their FAQ is causing more confusion than clarity. Do I really have to write my Congressman about this?
@Not that Lisa
Saw that too. Not holding my breath. It must be President Obma’s program for tourism! “Don’t overstay your welcome!”
It all depends on if you trust the IRS to apply the rules as written or what is moral.
@All – If the right of ‘local’ citizenship is confirmed by the courts, whatever the US Congress throws at us doesn’t matter. We can’t stop the Americans passing exterritorial laws, but we can lobby our ‘local’ governments to re-affirm where the US border stops. The main issue here I believe is setting the boundaries of globalization from a citizenship and taxation point of view.
If the big countries keep passing laws to tax each other and request each other’s data/services/money no government will truly know where it stands.
Unless each country has similar welfare, taxation, and economic/geo-political objectives, a global tax system is not possible without each country robbing off each other’s citizens and each country giving up its tax base to another making a national budget impossible if you can’t calculate your own national tax take. Where does it end?
The only simple answer is the US is going to have to learn the IRS’s border ends at the US physical border and not expect other countries to make up for its over-spending.
FATCA may prompt a re-negotiation of the present monetary system which went from Bretton Woods, to Nixon dumping the gold standard for floating currencies. China with its new found economic power is not going to sit still and allow the US continue the post WWII world. Having said that, FATCA may prove to be a failure when other global issues overtake the US’s need to fill their tax gap.
@Not that Lisa
@Mark Twain
Do NOT seek clarification on this point. Any request for clarification opens the door to their adopting that a visit over 35 days triggers problems.
Based on what you have included in your comment, I don’t see this as an issue.
You have quoted the following:
I read this as more generous and NOT restrictively. Here is why:
You will note that the words used are live abroad.
Obviously “living abroad” is very different from “visiting abroad”.
Somebody who:
1. Has a home in the U.S.; and
2. Visits Europe and stays in a hotel is NOT living abroad.
Americans abroad who visit the U.S. are NOT living in the U.S. that’ why they have to visit. (You know, they “go to visit family in the U.S. and that sort of thing.)
So, I think it means that the IRS is deeming you to “live abroad” if you:
A. Actually live abroad for a full calendar year; or
B. Actually live abroad for a period of 330 days (which could straddle multiple years).
In any case, the clear intent of the statute is to exempt Americans Abroad from the ObamaCare penalty. This is entirely fair BOTH because U.S. citizens abroad have health care where they live (and because they already have their fair share of penalties beginning at $10,000).
This concern demonstrates the degree to which Americans abroad distrust the IRS and the U.S. government.
The real “Obamacare problem for Americans abroad” is the 3.8% tax on investment income and whether it is either creditable against foreign tax paid and/or whether a tax treaty would interpret it in this way.
I think that these questions and concerns demonstrate that Obamacare is a big issue for Americans abroad.
Come to think of it:
All things about Obama are a problem for Americans abroad (unless you are one of those Stepford Wives).
http://isaacbrocksociety.ca/2012/12/19/democrats-abroad-are-like-the-stepford-wives/
Thanks US CitizenAbroad. You appear right about the word “live”. I agree with you. However, people who are not as adept as reading IRS wording as you look to these FAQs and get confused. I do not understand why the IRS could not say “Bona Fide residents abroad or” and then use the text they have. Maybe it is the clear to those in the IRS, but most people seeking guidance from the FAQs will focus on the physical presence component. I saw the panic in my two friends and imagine others will be similarly confused and panicked. It would be good to avoid that.
I agree with you strongly on the fact that the 3.8% Medicare Tax is the biggest problem.
@Not that Lisa
I totally understand and am sickened by the confusion. People simply do NOT need this. The reality is that the confusion is fueled and escalated by the distrust of the IRS. The worst thing (IMHO) would be to ask the IRS about this. If you live abroad you don’t pay the penalties period.
But, be careful, if the IRS thinks that enough people are confused by this they will announce:
OVDP for Obamacare penalties.
Possible example (and relax I am not serious):
Offshore Americans to
Voluntarily
Disclose that they visited the shining city for more than the 35
Permitted days.
Penalty 27.5% of your net worth!
It’s about disclosure!
@USCitizenAbroad
I was concerned about Mark and Lisa posts and almost wrote a letter to ACA for them to seek clarification, but am not glad I didn’t. Let sleeping dogs lie on that one.
You’re right- it’s not correct to assume that because 330 days outside the US would exclude us from ACA coverage, that being within the US 35 days would include us.
It’s not that we only distrust the US government, we’ve been conditioned to assume that our concerns will be overlooked (for instance, FATCA, 3.8% medicare tax and the fact that ACA had to seek an exclusion in the first place).
@USCAbroad, re; “…I totally understand and am sickened by the confusion. People simply do NOT need this. The reality is that the confusion is fueled and escalated by the distrust of the IRS. ..”.
The only default defensive position to take is to assume the US cannot be trusted, that there is always a penalty or a form you aren’t aware of, and that the US will be unreasonable. Assume that compliance will be costly and painful and laborious. Assume that for every normal financial event or opportunity to save, there will be a steep cost in potential liability or tax or penalty for making accidental errors.
This is pretty interesting. The current governor of Ohio is a bleeding Republican, whereas the US politicians from Ohio are characteristically Democrat. Overseas voters are very heavily weighted towards Democrat.
http://www.sos.state.oh.us/SOS/OVP.aspx
Ohio Voter Passport
Secretary of State Jon Husted
Dear Overseas Voter:
While you are away from the United States, I want to make sure that you are given all the access you need to fully participate in the election process. This brochure explains how you can vote from overseas and stay informed. By utilizing the Ohio Voter Passport, you can ensure that you not only receive and can cast your ballot, but have access to information on the issues and candidates as well. You can also track the status of your ballot all the way until it is counted by your board of elections.
Regarding Obamacare and days in US.
Number one. Regulations as written never go away. Someday someone at IRS will want to follow that regulation. When they decide to do it, they will interpret it the way they want. It will be up to the person having received the penalty to show to them what the meaning of “live” is. Of course this is fearmongeing but we are pretty good at setting up scenarios here.
B: Getting cloudy & muddy: European student in USA, with European short term health insurance purchased by mummy & daddy. Stays in USA for the entire 4 yrs. Stays in USA for one year. Stays in USA for one (4 months) semester. The University demands any such student to have health insurance, they used to demand health insurance of any kind. Does the IRS expect them to have health insurance? Since the state University is also an additional police agent for the Health Insurance Gestapo, what enforcement methods will they apply? again, just a scenario, but student is a grey area.
III) How many papers and how many forms are going to be needed in order to declare oneself exempt from overseas? How many boxes to check and how many hoops to jump through? What additional items must be disclosed? Will there be room on the form to write your country in the address section at the top of the form? Will there be some goofy calculation worksheet inside the 1116 or 2555? In another year, I guess we will find out if it is 4 lines or 10 forms to fill out.
4) Offshore US person travels to USA to be with sick parent. WHen they left, it was thought to be 35 days or less, but it ends up being more but less than 182 days. We assume it is a visit, is there any risk of it not being considered a visit?
hot off the press:
Nina’s Problems Facing International Taxpayers
http://www.taxpayeradvocate.irs.gov/2013-Annual-Report/full-2013-annual-report-to-congress/
@NotThatTara – Thanks for the link to the Taxpayer Advocate Annual Report. You were very quick. I am sure one of the Brock members will make a post out of it.
Initial Observations are:
The TAS knows how to listen to Taxpayers. The issues covered ring true for international taxpayers.
The Taxpayer Advocate, Nina Olson, has made some bold statements and recommendations. She has pointed out a lot of what is wrong with FATCA and how guidelines are unclear for people filing Form 8938. She is the first in the IRS to openly address theses issues. From her report, one also gets an idea on how FATCA is problematic for those implementing it.
I think her recommendation on the AMT couldn’t be more straightforward and appropriate. She directly states, “Repeal it”.
She also shows that problems continue with the OVD programs. I particularly like how she highlights that bad actors not only got lower relative penalties, but they got better customer service. She points out how those who had opt out cases were ignored. She gives figures on the closing times, but notes in a footnote that this only includes the agent’s processing time. She makes reasonable recommendations on how to try to help people become compliant.
She also mentions that for common foreign accounts there are no guidelines on how to report them. She focuses on Mexican AFOREs. She could have also mentioned Canadian RESPs and TFSAs.
All in all, she has done a very thorough job. It will be interesting to see the IRS and Congressional response to her recommendations.
Of course the TAS report is thorough. That is what Nina and staff are being paid for. But it will be filed and collect dust like those before it. I have no sympathy with the IRS because it is having FATCA implementation problems — no more than I would have sympathy with a bully having trouble keeping a grip on a stick being used to beat up his victim who is not showing enough compliance. As an aid to a few who qualify for its services, the TAS is somewhat useful but there are masses of people who are left outside the door, seething in uncertainty and fear.
Does the IRS ever change anything in response to the TAS recommendations? It might get more media attention if the Taxpayer Advocate would simply write a single sentence in the report stating that until the IRS stops wasting her time and effort there will be no further recommendations. As much as I appreciate the points that are made, it is maddening that no action is ever taken. It’s just a pitiful show put on by the IRS to give people the false impression that they are open to criticism and willing to change.
I think Nina Olson deserves a lot of credit for trying to do a very difficult (and possibly thankless) job in light of the limitations her position and department has. She is sincere and dedicated about trying to bring problems to light, and I am sure that the rest of the IRS does not thank her for it. I am sure that they do whatever they can to thwart here. She doesn’t let anything get past her – within the scope and mandate she has been given. It isn’t just window dressing or whitewashing in my opinion. In the past I think the report was prepared in collaboration or consultation with the IRS Commissioner (see description in a part of this year’s report), but that is not how it is done now.
The TAS reports are so detailed and rational and critical that at least we can feel a small bit of satisfaction that the IRS doesn’t just get an entirely free pass without the full application of whatever accountability the TAS can bring to bear on them. Note how much of her footnoted information comes from direct information requests she has made, and direct correspondence or conversations with other parts of the IRS or other individuals, groups and government departments. We would never even get any hint of any of that information without her efforts. This year, (3 months?) from the release of the report, the IRS must respond to the MSPs Most Serious Problems she identified, and to her recommendations (usually their responses are included in the January release). And according to another part of the report, she will call those responsible directly if it is something that she knows they could easily implement or have said that they favour implementing but have not done.
There are some things which are never acknowledged – I see that. I note that in the discussions of poor customer service, cutbacks, and the IRS refusal to extend in person services to other countries, as well as at minimum a toll free number, Canada is not mentioned. Since Canada and Mexico have the highest numbers of US ‘taxable persons’ outside the US, there is no effort to improve services to individuals in those two countries. There also is no geographical representative or agents assigned to bring forward and flag concerns that arise from problems with the IRS which are specific to individuals in Canada and Mexico as there is for all states inside the US. If the IRS classes us as equally taxable to actual US residents, then the TAS should be particularly concerned with such a large population of those being underserved right here in neighbouring countries. But, she did choose to quote MP Rankin and flag the sovereignty issue with FATCA, as well as allude to the idea that in considering the costs and benefits of FATCA, ‘costs’ include the unquantifiable costs to other countries and citizens abroad.
She flagged the continuing upswing in expatriations. Though I am sure that by now she knows that there is a problem with relying on the Federal Register numbers. When there is something like that that is logical but is omitted, then I have to wonder why. I don’t know if that is because she must accept what the IRS says officially on this or because of some other compelling interest.
She continues to detail the issue of ill defined ‘low’ vs. ‘high’ risk, and ‘reasonable cause’, etc. And provides specific relevant references to the IRM in the footnotes, which are very useful to those working on their own cases to explore and to become more educated about. I note that NotThatLisa and Just Me found that citing specific parts of the IRM was very useful in making their case.
We have no one else who can or will do this in the US. Though I am disappointed yet again that it appears as if Congress and the US media do not read the reports and ignore the MSPs that flag the issues of those living abroad, at least it validates many of the concerns we discuss here. And I note that the report also tries to help new immigrants to the US with the issue of pre-existing accounts from their country of origin – a needless entrapment of people who truly could not anticipate. That is a concern which as Christophe and others sometimes remind us (and ij is an example of the impact of that lack of concern demonstrated by the State dept and the IRS) is not receiving as much attention and discussion here and elsewhere as the plight of those living outside the US.
Canadian firm loses Obamacare website work:
http://www.canoe.ca/Canoe/Money/News/2014/01/10/21389456.html
……”The Obama administration is terminating its contract with a Canadian-linked tech firm following the Obamacare website fiasco.
CGI Federal, a U.S. subsidiary of Montreal-based CGI Group, Inc., was partly blamed for website glitches that frustrated millions of Americans and embarrassed President Barack Obama
A news report out of Washington says federal authorities have concluded CGI Federal can’t resolve the glitches with the Healthcare.gov website.
Federal authorities are reportedly preparing to sign a new one-year, $90-million contract with U.S.-based Accenture to take over website management.”