U.S. equities fell this week for the first time since August amid concern the budget impasse in Washington will hinder economic growth. The government’s spending authority will expire on September 30th without a continuing resolution being approved by both the U.S. House of Representatives and the U.S. Senate.
The U.S. Senate approved a bill today to finance the government through November 15th to stave off a government shutdown and the bill will now return to the House for a vote. The Senate’s bill stripped out the House’s plan to defund Obamacare which should lead to a weekend filled of brinkmanship and political bickering between both parties.
Boehner said yesterday the House wouldn’t pass a “clean” spending bill after the Senate acts and then said he has “no interest in seeing a government shutdown”.
Affordable Care Act
The new healthcare law dubbed Obamacare will have the insurance exchanges open October 1st for individuals. Individuals and their dependents are required to have essential coverage starting January 1st, 2014 in order to avoid owing a tax. A one year delay has been implemented for companies with 50 or more full time employees. The rule that will become effective in 2015 requires these companies to provide affordable health insurance for their employees or face paying a fine.
The tax for individuals in 2014 is calculated as the higher of two amounts: The first is a basic penalty which is $95 per person with a$285 cap per household. The second is an income based penalty of 1% on the excess of household AGI above the AGI limit required for filing a tax return. Both levels will increase in 2015 and 2016. The related tax is paid on the income tax return Form 1040. Therefore the tax due for tax year 2014 will not be paid until tax filing time in 2015.
Interestingly, because of the one year delay on the employer mandate until 2015, companies are not required to report information on which employees do or do not have coverage. Due to this there is no way to accurately track which workers are without coverage. Additionally, at this time the IRS has no way to enforce collection of the taxes due except by offsetting the amount from an income tax refund.
We will be providing additional insight in our 3rd quarter newsletter that will be sent out in a few weeks.
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