Admitted to Practice Before the Internal Revenue Service
At press time, the Senate is in the process of debating health care reform. And you know what that means: more changes to the tax code. Let’s take a peak under the hood, shall we? Here’s what they’re talking about:
A 40% excise tax on “Cadillac health plans” with benefits exceeding $8,500 for individuals or $23,000 for families levied on insurers
Conforming the definition of “medical expenses” for HSAs, MSAs and cafeteria plans
Increasing penalty for non-qualified health savings account distributions to 20%
Limiting health flexible spending arrangements in cafeteria plans to $2,500
Imposing new annual fees on manufacturers & importers of branded drugs and medical devices
Imposing new annual fees on health insurance providers
Eliminating deductions for expenses allocable to Medicare Part D subsidy
Raising the 7.5% AGI floor on medical expenses deduction to 10%
Imposing a 5% excise tax on cosmetic surgery (I call it the “Bo-Tax!”)

Of course, it remains to be seen what the changes will be. By the time you read this article, it may all be a done deal. One thing you can be sure of, though, is that it will affect your taxes. Regardless of what political persuasion you belong to, or if you have no political position at all, get ready for “the ride of your life!” Most people expect health care reform to hit you where it hurts. (That would be—in the wallet.) However, regardless of the form that health care reform takes, there will be many changes afoot and they won’t be for the faint of heart!
This is no time to go it alone when it comes to your taxes. A software program can’t do your taxes for you. Even the highest-ranking official of the Department of the Treasury used a well-known commercial software program and made errors. But that’s another story!

On the other hand, seeking the advice of an Enrolled Agent (EA) is a smart move. An EA is a federally-licensed tax practitioner who has technical expertise in the field of taxation and is empowered by the U. S. Department of the Treasury to represent taxpayers for audits, collections and appeals before all administrative levels of the Internal Revenue Service.
Only Enrolled Agents demonstrate their competence in matters of taxation and report their hours of continuing education to the IRS. EAs are the only taxpayer representatives who receive their right to practice directly from the U. S. government. (CPAs and attorneys are licensed by states and their licenses are state specific.)

Enrolled Agents advise, represent and prepare tax returns for individuals, partnerships, corporations, estates, trusts and any other entity with tax-reporting requirements. EAs prepare millions of tax returns annually. EAs’ expertise in the continually changing field of taxation enables them to effectively represent taxpayers.

Every year there are numerous changes to the tax code and tax laws in general and 2009 is no exception! IRS Code sections now number from 1 to over 9,800 and encompass more than 11,000 pages and 14 million words. Frequently, provisions are added (like the changes that will be coming with health care reform) while others expire. Some are indexed for inflation, so they change as well. Some are effective at the beginning of the year while others are effective on the date that a particular law is signed. The bottom line is that the tax code and regulations are very complex and Congress is continually changing the tax laws. Enrolled Agents are required to take continuing education courses each year to keep up with the changes and they have research tools at their disposal to constantly monitor the updates. Most taxpayers do not have the time or the research tools to read the volumes of material that are added to or deleted from the tax code each year.
So, stay tuned as the health care reform question is answered. No matter what happens, the IRS will be involved—managing major parts of this reform and the IRS will certainly grow as a result. They will have to enforce a mandate on individuals and businesses. By 2013 most taxpayers will be required to show they have health care coverage or pay a penalty when filing their returns.

But that’s not all, here’s just a few more things that will be forced on an already bureaucratic agency:

Remitting affordability credits (to help low incomers pay for coverage)
Policing requirements for employers (collecting fees to offset cost of tax credits)
Implementing a new excise tax on high cost health plans (helps pay for “reform”)
Checking tax credits claimed by small firms (there’s a new credit)
And much, much more

What does all of this mean? It means the tax code is getting more complicated, not less. It means more chances mistakes can be made if you go it alone and certainly more chances of an audit. The Service is hiring thousands more revenue agents and revenue officers to meet a growing demand for bringing in additional money. That means you’re likely to be a target.
Your key is finding the right professional who can guide you through the maze of changes that will impact you in 2010 and beyond as the newly-enacted health care reform takes shape.

Owen S. Arnoff, EA, is the founder and President of Better Business Ventures, Inc., a North Sacramento tax professional helping individuals and small business owners to meet their tax obligations. He has helped hundreds of taxpayers reduce their tax obligations using strategies that most people never knew existed or could be applied to their situation. Give him a call at (916) 481-5252 and see how he can help you. Owen regularly takes over 100 hours of continuing education each year so he can be of maximum assistance to his clients. He has also published a book for small business owners, called “The Successful Business Owners Guide.” Visit his web site at www.BetterBusinessVentures.com. Check out his blog at www.SacramentoTaxBlog.com.
This article is intended to provide accurate and authoritative information with regards to the subject matter covered. It is written with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent tax professional should be sought.