Sep 30

Oklahoma Court Strikes Down Obamacare Subsidies

The Federal Court for the Eastern District issued a ruling today that struck down subsidies for people who get their health insurance from the federal healthcare exchange. Of course, the ruling will be suspended until there is a higher ruling on it, but it follows the holding of previous district courts as well as the ruling by the D.C. Circuit Court before it was vacated to be heard en banc.

Although the ruling would essentially leave millions without health insurance, it comes from the direct reading of the Affordable Care Act (ACA or Obamacare), which says that subsidies are available for people who get their insurance from “exchanges established by the State.” The ACA defines State as the 50 states and the District of Columbia. It specifically leaves out the federal exchange and the territories.

Some may say that this is an activist judge who is making law, but I disagree. This is a judge who is actually reading the unambiguous language enacted by Congress. If Congress feels that this should be changed, then it can make an amendment to the ACA.

Regardless, our health insurance will never return to what it was. I received my cancellation notice on the policy that I have had for three years last week. The policy that I liked was no longer compliant with the law. Being a single man, I never knew that I needed maternity coverage, and not being a smoker or involved with other vices, that I needed coverage for diseases related directly to them, but, hey, I guess Washington knows better than me what I can purchase with my own money, so I will have to find a new policy or go without coverage. But I guarantee that any new coverage will cost more than the $130 per month I was paying previously.

All of this leads to my thought on this rant: ensure that you elect officials that hold your belief, especially to the US Senate. Those Senators will be confirming or denying the judges that will ultimately decide validity to poorly written laws.

Sep 23

Obamacare Individual Insurance Exemptions

The IRS has just released Publication 5172 which details some of the Exemptions/Waivers for individuals to purchase health insurance this year. The exemptions mainly have to do with hardships or lack of income/affordability for insurance, but some could be interpreted pretty broadly.

Here is a short list from the IRS website:

Exemptions May only be granted by Marketplace May be granted by Marketplace or claimed on tax return May only be claimed on tax return
Coverage is considered unaffordable - The amount you would have paid for employer-sponsored coverage or a bronze level health plan (depending on your circumstances) is more than eight percent of your actual household income for the year as computed on your tax return. Also see the second hardship listed below, which provides a prospective exemption granted by the Marketplace if the amount you would have paid for coverage is more than eight percent of your projected household income for the year. Yes
Short coverage gap - You went without coverage for less than three consecutive months during the year. For more information, see question 22 of ourquestions and answers. Yes
Household income below the return filing threshold - Your household income is below the minimum threshold for filing a tax return. Learn more about household income. Yes
Certain noncitizens - You are neither a U.S. citizen, aU.S. national, nor an alien lawfully present in the U.S. Yes
Members of a health care sharing ministry - You are a member of a health care sharing ministry, which is an organization described in section 501(c)(3) whose members share a common set of ethical or religious beliefs and have shared medical expenses in accordance with those beliefs continuously since at least December 31, 1999. Yes  





Members of Federally-recognized Indian Tribes - You are a member of a federally-recognized Indian tribe. Yes
Incarceration - You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges. Yes
Members of certain religious sects - You are a member of a religious sect in existence since December 31, 1950, that is recognized by the Social Security Administration (SSA) as conscientiously opposed to accepting any insurance benefits, including Medicare and Social Security. Yes
  • Your gross income is below the filing threshold. To find out if you are required to file, use ourInteractive Tax Assistant.
  • Two or more family members’ aggregate cost of self-only employer-sponsored coverage exceeds 8 percent of household income, as does the cost of any available employer-sponsored coverage for the entire family.
  • You purchased insurance through the Marketplace during the initial enrollment period but have a coverage gap at the beginning of 2014. See thisHHS Question and Answer.
  • You are experiencing circumstances that prevent you from obtaining coverage under a qualified health plan. Learn more about the criteria for this exemption.
  • You do not have access to affordable coverage based on your projected household income.
  • You are ineligible for Medicaid solely because the State does not participate in the Medicaid expansion under the Affordable Care Act.
  • You are an American Indian, Alaska Native, or a spouse or descendant who is eligible for services through an Indian health care provider. Learn more.
  • You have been notified that your health insurance policy will not be renewed and you consider the other plans available unaffordable. See HHS guidance and HHS Questions and Answers for more information.

From a tax/estate planning view, it would seem that the last “hardship” of cancelled insurance and then your own consideration that available plans are unaffordable would sidestep the whole law.

Sep 19

50 Years of the War on Poverty

I read an article earlier this week that it has been 50 years since President Lyndon Johnson launched the US into the War on Poverty. From the article ( it states that the inflation adjusted amount is nearly $22 TRILLION in 2012 US dollars. Yet, the article states that there has only been a decrease in people living in poverty from 19% to 15% over the 50 years. This comes as the U.S. and states are administering 120+ programs that look to redistribute wealth.

In my line of work (business, estate and tax planning), I see a few wealthy clients, but mostly I see upper middle class people. Most have made the American dream through hard work, saving, and most importantly, not spending beyond their means.

I always think back to the teaching of Jesus when Mary anointed his feet with expensive oils and the disciples admonished her for using such oil when it could have been sold and benefited the poor. Jesus said, “you will always have the poor.” I think that the government needs to heed this and instead of seeking to make all equal through wealth distribution, to do its part to educate and give opportunity to make it rich. Just my thoughts.

Sep 17

Necessity to fund your trust

As I am working today on research of legal descriptions for a farmer, I wanted to take some time and put out a reminder that your Successor Trustee can only control property that has actually been placed in your Trust during your lifetime.

You can only fund real property (land, houses, minerals) into your trust by conveyance through a recorded deed. For bank accounts, money market accounts, investment accounts, stocks and bonds, you must go to each financial institution and change the ownership. For titled vehicles, you must take the Certificate of Title to the Tag Agency (in Oklahoma) and have a new Title reissued in the name of the Trust. If you want to designate your Trust as beneficiary on life insurance, an annuity, or, if you are fully informed of the consequences, a retirement account, then you must make such designation with the company/custodian of the account.

If you do not make the changes during your lifetime, the asset will either have to go through probate to be re-titled into the Trust, or if there was a separate beneficiary/joint designation, it will still follow that other contract, rather than your Trust.

The important thing is to review your assets on at least an annual basis to see where title is actually held. If you have questions, you should contact your estate planning attorney to get them answered. If you wait too long you may subject your beneficiaries to undue costs and delays (because of probate) or lost inheritance (because of incorrect beneficiary designations).

Feel free to contact me if you would like a complimentary review of your plan to ensure it does what you want it to.

Sep 15

Who Will Likely Be Audited in 2014

According to a recent email from Western CPE, authored by Sharon Kreider, the IRS has released their plans for 2014-2015 in what returns will be most scrutinized in the coming year. According to the article, these areas will be more focused on because of increases in numbers of returns, potential for frauds, or changes in the law. From the report:
The GAO says that since FY 2010, the IRS has lost 10,000 employees and had its budget cut by $900 million. More cuts are proposed for the 2015 IRS budget. Identity theft issues, foreign asset reporting, and Affordable Care Act (ACA) responsibilities will continue to absorb personnel and resources. This budget reality will hamper IRS audit goals, but there are still many audit targets that you will want to discuss with your business clients in the next few months.

The rich and their entities. High-income taxpayers will continue to receive audit attention (at about a 9% rate for those reporting income of $1 million to $5 million). Since these taxpayers often have complex tax returns with income and losses from many flow-through entities, the audit of the owner will often lead to an expansion of the IRS examination into the various entities.

Partnership returns. Partnerships are the fastest-growing segment of all tax returns filed. The IRS hopes to expand its audits of partnership and LLC returns. Flow-through losses from developers and real estate investors will get special attention. The audit rate of partnerships and LLCs was a dismal .42% for FY 2013. The IRS did special training this year to increase the number of auditors with a specialized knowledge in partnership law.

Employment taxes. Employment taxes are a focus this year, and this includes a continuing look by the IRS at:
Employee versus independent contractor,
Form 1099 compliance, and
S corporation reasonable compensation issues.
Remember that when the ACA’s employer mandate takes effect in 2015 and 2016, the employee versus independent contractor determination will become more important. Employer ACA penalties can be up to $3,000 for each misclassified employee.

Cash businesses. The tax gap remains a hot item, so cash-intensive businesses will receive a little more attention from the IRS. The IRS is using Form 1099-K to help it select some of these businesses for audit.