What You Should Know About Recent Updates to CARES Act Reporting Requirements for Healthcare Providers

The Coronavirus Aid, Relief, and Economic Security (CARES) Act Provider Relief Fund was initially established to provide funding to healthcare service providers impacted by the COVID-19 pandemic. While the financial support has provided much-needed relief, the programs introduced some additional rules and reporting requirements for healthcare providers. On October 22, 2020, the Department of Health and Human Services (HHS) updated its guidance on how providers should report their Provider Relief Fund (PRF) payments that have been allocated for expenses and lost revenues as a result of the pandemic. Below is an overview of what you need to know.

Key Clarifications to Instructions

Addressing some of the ambiguity present in the previous September 19 update, two key clarifications were set forth.

  • Method of accounting: The HHS has clarified that PRF payments should be reported using the provider’s normal method of accounting (cash or accrual basis).
  • Lost revenue definition: In a twist from prior instructions, which defined lost revenue as a negative change in year-over-year net patient care operating income, recipients may now apply PRF payments up to the amount of the differences between their 2019 and 2020 actual patient care revenue.

If recipients do not use PRF funds in full by the end of the 2020 calendar year, they will have a further six-month period in which to utilize leftover amounts for expenses attributable to the pandemic but not repaid by other sources, or to apply toward lost revenues in an amount not greater than the difference between 2019 and 2021 actual revenue.

PRF Reporting Requirements

The deadlines from here on out are as follows:

  • January 21, 2021: HHS portal opens for PRF reporting
  • February 15, 2021: Reporting deadline for all providers on use of funds, assuming all proceeds were accounted for in 2020
  • July 31, 2021: Final reporting deadline for providers who did not fully spend PRF funds before December 31, 2020
  • September 30, 2021: Due date for the single audit or program-specific audit reports for a December 31 year-end or the earlier of 60 days from the date of the issuance of the audit report

PRF recipients can start submitting PRF reports documenting how funds were spent or attributed beginning January 15, 2021. The level of reporting requirements differs by the amount received as follows:

  • Entities that received less than $10,000 in total from the PRF do not have to file a report
  • Entities that received more than $10,000 but less than $500,000 must submit a simplified report with only these broad expense categories: general administrative expenses and other healthcare-related expenses.
  • Entities that received more than $500,000 in PRF must submit a detailed report described below.
  • Entities that received over $750,000 in PRF may also be subject to an audit per federal regulations.

Audit Requirements

If an entity received more than $750,000 in PRF, they may be subject to an audit per federal regulations. Audits are required for entities (non-profit and commercial as it relates to PRF per HHS guidelines) that spent over $750,000 from federal grant funds in a reporting period. Note the difference between receiving $750,000 and spending $750,000. Some funds could have been received in cash but not yet spent.

Let MKR CPAs & Advisors help

Our trusted advisors are equipped with the expertise to help you unravel the complexities of these reporting requirements. If you need assistance, contact an MKR advisor today to get the conversation started.

Essential Year-End Tax Tips

As the clock winds down to the end of the year, there are a few last-minute money moves to make in order to lower your tax bill.

Maximize Your 401(k) and HSA Contributions

While tax deductible contributions can be made to traditional and Roth IRA accounts until April 15 of 2020, the deadline for 401(k)s and HSA accounts is December 31 of this year. You can contribute up to $19,000 to a 401(k), 403(b), most 457 plans, and federal Thrift Savings Plans (plus $6,000 in catch-up contributions for those who are 50 or older). As for HSA accounts, the maximum contribution for 2019 is $3,500 for individuals and $7,000 for family coverage. And if you’re 55 or older you can contribute an additional $1,000.

Start Thinking About Retirement Contributions for 2020

Retirement contributions to 401(k)s have increased for 2020. Individuals can contribute $19,500 next year, and those 50 or older can contribute an additional $6,500. If you prefer to spread out your contributions evenly throughout the year, you’ll need to adjust your monthly contribution amounts by January.

Take Advantage of Your Flexible Spending Account

Funds in a flexible spending account revert back to the employer if not spent within the calendar year. Some companies might provide a grace period extending into the new year, but others end reimbursements on December 31.

Prevent Taxes on an RMD with Charitable Donations

After seniors reach age 70 ½ they must take a required minimum distribution each year from their retirement accounts (an exception to this rule is a Roth IRA account). Seniors who aren’t dependent on this money for living expenses should consider having it sent directly from the retirement account to a charity as a qualified charitable distribution, effectively preventing the money from becoming taxable income.

Consider a Roth Conversion

Because withdrawals from traditional IRAs are taxed in retirement while distributions from Roth IRAs are tax-free, you might think about converting some funds from a traditional IRA to a Roth IRA. Just be sure this move doesn’t tip you into the next tax bracket. You’ll need to pay taxes on the initial conversion, but the money will then grow tax-free in the Roth IRA.

Take Stock of Losses

Sell any losses in stocks for a deduction of up to $3,000, but be aware that purchasing the same or a substantially similar stock within 30 days of the sale would violate the wash-sale rule. If that happens your capital loss would be deferred until you sell the new shares.

Meet with a Tax Advisor

If you’re unsure whether or not you’re ending the year in a favorable tax bracket, check in with an advisor who can identify actionable steps to reduce taxable income through retirement contributions or itemized deductions.

Essential Money Moves to Make Before the Year’s End

The end of 2018 is quickly approaching, but there are a few key money moves you should make before the new year, especially in light of the Tax Cuts and Jobs Act. The higher standard deduction means more Americans will ditch itemizing their 2018 federal tax returns.

That means you should probably focus on year-end tax strategies that first lower taxable income, rather than maximize tax deductions. Here are a few key items to tackle before the ball drops on the new year.

Take Stock of Losses

If you follow the stock market, you know that the last few months have been volatile, so there’s a good chance that some of your investments have become losses. That might sound bad, but any losses that are in a taxable account, such as an investment account, bank account, or money market mutual fund, can be sold to offset other taxable investment gains in the same year. Furthermore, if your losses exceed your gains, you can apply up to $3,000 to offset ordinary taxable income from this year.

Max Out Retirement Savings

As close as possible, that is. The more money you put into your 401(k), the more financial security you’ll have in the long run, but a lot of these contributions also reduce your taxable income. At this point you probably only have one or two more paychecks from which to have funds withheld, but even a few hundred dollars more can provide some near-term tax relief as well as bolster your retirement savings.

Fund Your HSA

You have until the 2018 tax-filing deadline to fully fund your health saving account (HSA) in order to get a bigger deduction. The maximum limits are:

  • Individuals: $3,450
  • Families: $6,900
  • 55 or older: an additional $1,000 catch-up contribution

These accounts can roll over indefinitely, so they’re a smart way to save for future medical expenses. HSAs also have a triple tax benefit: contributions are tax-deductible (even if you don’t itemize), earned interest is tax-free, and withdrawals are tax-free as long as they’re used to pay for qualified medical expenses.

Use Up Your FSA

The funds in a flexible spending account typically don’t roll over to the next calendar year. However, some employers allow $500 to carry over into the new year or grant employees until March to spend FSA funds. Even so, now is a good time to use the pretax dollars for doctor appointments, flu shots, and even some “everyday” drugstore items, such as non-prescription reading glasses, contact lenses and solutions, and reading glasses.

Maximize Deductions

If you’re wondering whether you should itemize your 2018 tax returns or take the standard deduction, here are a few last things to keep in mind:

  • Medical treatment: If you spend more than 7.5 percent of your adjusted gross income this year on medical expenses, you can deduct those costs.
  • Property taxes: If you paid less than the $10,000 limit for state and local taxes, your state may allow you to prepay 2019 property taxes. This way you’ll get the most from the state and local taxes deduction.
  • Mortgage Interest: Provided you’re not near the cap on the mortgage interest deduction, which is $750,000 after the new tax law, you can make your January mortgage payment in December to boost the amount of interest you paid during the 2018 tax year.
  • Charitable donations: If you routinely give to charities, double up on contributions and make your 2019 donation before year’s end. If you put the double donation into a donor advised fund, which is like a charitable investment account, you’re eligible to take an immediate tax deduction. That means you can take the deduction for 2018 while your funds are invested for tax-free growth, allowing you to make distributions to charity next year or beyond.

Here’s How Medicare for All Could Affect Americans

According to CNBC, 70% of Americans support Medicare for all, but the term is still murky for Americans. What does it actually mean and how could it affect Americans?

Implemented in its most historical meaning, Medicare-for-all would completely wipe out private coverage and replace it with a single-payer health insurance – a national government-run program that would cover every American. Under such a plan, deductibles, premiums, and co-payments would likely be things of the past. The government would deal directly with drug makers, which would lower prescription costs and streamline the administration process. Reuters defines it as “a publicly financed, privately delivered system with all Americans enrolled and all medically necessary services covered.”

How Much Would it Cost?

A study recently released by the Mercatus Center at George Mason University found that Sen. Bernie Sanders’ plan for universal healthcare, which is the highest-profile plan for Medicare-for-all, would increase government healthcare spending by $32.6 trillion during its first 10 years.

What Opponents Say

Supporters of Medicare-for-all are typically quick to point to Canada, which has successfully implemented a single-payer system, though Canadian citizens pay more in taxes than American citizens. Opponents argue that even as taxes and federal costs for health care rise, expenses for individuals and companies would drop, potentially canceling each other out. They’re also likely to refer to the Mercatus study for a different reason: the report suggests that national health expenditures – which include all national health spending (i.e. state Medicaid programs and private employees), not just government spending – could decline by $2 trillion over the first 10 years of implementation, though the author of the study admits that this is an unreliable number because it depends on too many variables.

What Critics Say

In 2016, the Urban Institute, a nonprofit research organization, came up with roughly the same number as the Mercatus study: $32.6 trillion over a 10-year period. Assuming both studies are correct, this would create an overwhelming financial burden on the federal government, requiring unprecedented tax hikes. Critics are also quick to liken Medicare-for-all to Medicaid rather than Medicare, claiming that if America is forced into a one-size-fits-all government program, patients will likely face long lines and delays in treatment. Moreover, the Mercatus study found that virtually any savings accrued from a single-payer plan would vanish if doctors and hospitals, who would be paid at least 10% less, wouldn’t agree to accept lower fees for patients who are now privately insured.

Healthcare reform is complicated, and the associated costs of Medicare for all have proven to be a stumbling block. Though Sanders’ plan is the most popular among Medicare-for-all advocates, he has yet to release a financing plan, so the potential impact on Americans and the healthcare industry as a whole is still uncertain.

Trumpcare: What It Repeals, Replaces And Keeps The Same

On the mind of many Americans in recent months is how our new President will alter the healthcare system. His promise throughout the campaign was that Obamacare would be “repealed and replaced” as quickly as possible. However, we all know the feeling when our time frame for getting things done doesn’t always work out, or how we envisioned a project would turn out isn’t often the final product either. Just last week, the House passed an initial bill that reconfigures the healthcare system as it is today; however, it still has to pass the Senate, and will likely go through many changes and amendments before being finally accepted into law. Although Trumpcare may not look exactly how President Trump imagined, nor has it “repealed and replaced” Obamacare as rapidly as he may have originally hoped, here are some key differences between his plan and our current system.

  1. Immediate repeal of the 3.8% net investment income tax, which taxes income from royalties, interest, rents, dividends, passive activities and gains for those with a gross income over $200,000. 
  2. Immediate repeal of the individual mandate excise tax, or the tax owed if you did not have health insurance. 
  3. Health savings account withdrawal penalties would drop from the 20% under Obamacare to what it was before, 10%. This penalty only occurs if you withdraw money from an HSA before 65 for non-medical expenses. 
  4. Removal of the $2,500 cap on the amount of pre-tax funds allowed to be placed in a healthcare flexible spending account. Decisions to impose a cap or not would be left up to employers. 
  5. Those with FSA’s or HSA’s would also be allowed again to utilize those pre-tax funds on over-the-counter meds. 
  6. Lowers the rate for medical itemized deductions. If you were under 65, Obamacare only allowed deductions for medical expenses that exceeded 10% of your adjusted gross income, whereas Trumpcare would take it back down to the previous 7.5% of your adjusted gross income. 
  7. While Trumpcare would eventually repeal the 0.9% additional Medicare surtax on those with gross incomes over $200,000, it would not do so until 2023, which is later than the first healthcare bill the House introduced.  

For the time being, these are the tax adjustments in place, although these could presumably change once the bill works its way through the Senate. This version of Trumpcare certainly differs from the House’s first proposal, but Americans may see many months pass and many modifications occur before the healthcare system truly moves away from Obamacare.

If you have any questions, please feel free to contact me at dkittell@mkrcpas.com.

Take a look at my article on a similar topic: “The New GOP Healthcare Plan and What That Means for You”.