With the need to collect the so-called “Cadillac Tax” looming, the IRS is trying to determine the best way to do so. As a part of the Patient Protection and Affordable Care Act, the most generous employer provided health care plans are subject to a 40 percent excise tax. The 40 percent tax will be applied to group health insurance premiums that are greater than $10,200 for single person coverage and more than $27,500 for coverage for families starting in 2018.
Although a number of unions, which normally provide top tier health plans for members, have been able to obtain exemptions, a study determined that the tax will apply to about half of employers when it first starts being collected in 2018. The number of employers being affected is expected to keep growing, reaching 80 percent by 2023.
Aside from the high levels of taxation, the way that the IRS may collect the tax has also drawn criticism. The insurer is required to pay for the tax according to the law, but in most cases, an employer will reimburse the insurer for the cost of the tax. However, this has the potential to present a double taxation situation since the reimbursement will be considered taxable income.
Tax laws can change without someone noticing them, and new laws can cause someone to owe money as a result of things they would never consider to be taxable. If someone is not prepared to deal with changes to law that greatly increases the taxes they owe, they could end up facing a wage levy. A lawyer could help someone understand the implications of new tax laws and assist them if they are facing collection efforts.