Internal Revenue Service Decides Electronic Health Record Incentive Payments are Taxable
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law
The Internal Revenue Service (IRS) has taken the position that electronic health record (EHR) incentive payments are taxable. Previously it was not specified how EHR incentive payments were to be treated or reported to the IRS. On January 14, 2013, the IRS issued guidance on this issue in a memorandum from the Office of Chief Counsel. This memorandum lists tax issues facing those who have received or who will receive EHR incentive payments. It also states the IRS’s position on those issues.
IRS Considered Three Different Issues and Gave its Stance on Each Issue.
In its memorandum, the Office of Chief Counsel considered the following three issues:
1. Whether recipients must include in gross income electronic health record
incentive payments paid by the Centers for Medicare and Medicaid Services
(CMS) pursuant to the American Recovery and Reinvestment Act (ARRA).
2. Whether CMS has a reporting requirement with regard to payments made under the EHR Incentive Program.
3. Whether the reporting requirement is altered if the payment is assigned to a third party.
The Summary of the Office of Chief Counsel’s Position on Each of the Issues.
1. The recipients must include the incentive payments in gross income unless they receive the payments as a conduit or an agent of another and are thus unable to keep the payments.
2. CMS has a reporting requirement under section 6041 of the Internal Revenue Code with respect to the eligible providers.
3. In the event of an assignment by the eligible providers to a third party, CMS would be obligated to report a payment to the eligible provider, even if the payment is assigned to a third party. The eligible provider would then likely bear a reporting obligation with respect to the assignment to a third party. CMS would not have a reporting obligation with respect to the third-party assignee unless CMS exercised managerial oversight with respect to, or had a significant economic interest in, the assignment.
Click here to read the entire memorandum.
Health Care Professionals Be Aware.
According to the IRS, taxpayers cannot avoid tax by turning over income to someone else. For example, a doctor earns an EHR incentive payment and turns it over to his/her practice. That doctor may still have to include the EHR payment on his/her personal tax return. The IRS allows an exception. If the doctor received the payment as an agent of the group practice, the doctor does not have to report it on his/her personal tax return.
Health care professionals and providers who have or will receive EHR incentive payments should plan to deal with the tax consequences of those incentives.
Contact Experienced Health Law Attorneys.
The Health Law Firm routinely represents physicians and medical groups on EHR problems. It also represents pharmacists, pharmacies, physicians, nurses and other health providers in investigations, regulatory matters, licensing issues, litigation, inspections and audits involving the DEA, Department of Health (DOH) and other law enforcement agencies. Its attorneys include those who are board certified by The Florida Bar in Health Law as well as licensed health professionals who are also attorneys.
To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.
As a health care professional, do you think electronic health record (EHR) incentive payments should be taxable? Please leave any thoughtful comments below.
Goldberg, Alan. “Healthcare Reimbursement List.” American Health Lawyers Association. (April 26, 2013).
Montemurro, Michael. “Electronic Health Records Incentive Payments, POSTS-145204-12.” Internal Revenue Service. (January 14, 2013). From: http://www.thehealthlawfirm.com/uploads/1307005.pdf
About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.
“The Health Law Firm” is a registered fictitious business name of George F. Indest III, P.A. – The Health Law Firm, a Florida professional service corporation, since 1999.
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