Tax reform is coming, going into effect in January 2018 and impacting the way individuals and businesses file come 2019. The new tax plan, after being finalized and signed into law, affects nearly everyone in the country, and will bring both good news and bad news for health care organizations, medical staffing agencies and the health care employees they work with.
Changes on the horizon: The good news
First, let's take a look at some of the advantages the new tax law will bring for workers in the medical field.
Reduced income taxes
According to Nurse.org, most American taxpayers currently claim the standard deduction. Under the new law, medical employees who fall within this range will notice an increase in their take-home pay, thanks to the fact that income taxes are lower and employers will take out reduced sums.
For medical staffing agencies and health care institutions, this means that hiring and recruitment practices could benefit. Hiring managers can inform certain candidates that their take-home pay will be increased, providing a bit of extra incentive.
Alternative Minimum Tax changes
As contributor Karen Riccio pointed out in Medscape, the Alternative Minimum Tax rule is something that many doctors, due to their high income earnings, have viewed with contempt since its enactment in 1969. While the new tax bill doesn't completely do away with AMT, it does provide higher exemptions and phase-outs.
AMT requires that those who file singly and earn $129,700 or above, or file jointly and earn $160,900 or above, calculate their taxes both with and without regular income tax deductions. Under AMT, those in this category then have to pay the higher of the two amounts.
Although lawmakers did discuss potentially repealing AMT altogether, the final version of the bill was not able to achieve a complete overturn. Instead, the new tax reform allows for "more generous" exemptions, enabling doctors and other high earners in the health care field to subtract a higher amount from AMT liability. According to CBS News contributor Larry Light, the new law raises AMT exemptions by nearly one-third - in other words, where a single filer could exempt $54,300 under the old law, the same filer can now exempt $70,300.
The bad news: Elimination of employee expense deductions
"The tax reform may mean reworking traveling employees' pay package."
While take-home pay and AMT exemptions will see certain advantages under the reformed tax law, the news isn't completely rosy for medical staff, especially when it comes to traveling staff members. The new legislation removes employee expense deductions, meaning that items like mileage and licensing fees are no longer deductible.
"Under the [old] law, when a staffing provider is working away from their tax home and incur travel expenses of transportation, meals and lodging, they can deduct the expenses that are greater than the reimbursements provided as an employee business expense on their tax returns," Joseph Smith wrote for The Staffing Stream. "Under the current tax reform bills, ALL employee business expenses (save a limited teachers deduction and reservists travel expenses) will no longer be deductible."
For medical staffing and health care institutions, this may mean reworking traveling employees' pay packages, wherein smaller allowances are offered for items like housing, and the sum shifts to other categories like licensing and mileage.
In addition, in order to remain in step with all of the emerging changes taking place under the new tax reform, it's imperative that staffing managers, recruiters and other health care stakeholders have as much visibility over their critical processes as possible. A workforce management platform like that offered by BlueSky Medical Staffing Software can help keep all the details organized, including those related to staff scheduling, compliance management and payroll and invoicing.
To find out more, contact us for a demonstration today.