February 4, 2010
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News: IRS Pressures Healthcare Providers
Uncle Sam is putting pressure on the medical industry. A growing practice by healthcare providers who insist that patients obtain a medical credit card if they are unable to pay for services upfront, has the Internal Revenue Service (IRS) concerned about possible tax issues. A new law, The Housing Assistance Tax Act of 2008, says that credit card processing companies, who process payments for healthcare providers during 2011, must report the them to the IRS in 2012. Accepting credit card payment in the healthcare industry has become an ordinary practice. Physicians, surgeons, dentists, orthodontists, and even chiropractors have all join the ranks of reducing monthly accounts receivables with this new practice.
Previously, healthcare providers have reported credit card receipts as cash. However, that will all change next year. Small businesses as well as medical providers that collect more than $20,000 or over 200 transactions of debit or credit card receipts will be issued a 1099-K form. The form will be issued by their card processor and required to be reported with tax returns. The forms will be similar to the 1099 issued to the healthcare provider by the insurance company. The IRS believes that the new rule will provide a valuable tool in closing the tax gap. Furthermore, it is expected to help providers become better organized and prepared.
The IRS designed the new rule to assure that small businesses and healthcare providers do not miss any credit card income when completing income tax returns. In other words, to assure that the IRS gets all the taxes due. The new rule will put added pressure on individuals who complete the tax returns for these businesses because they will need to check and recheck that the total income reported to the IRS is greater than what is reported as electronic income. Doug Shulman, IRS Commissioner, said that the agency will work closely with all involved to ensure a smooth transition. The IRS has scheduled a public hearing on the implementation of this change Feb. 10 in Washington D.C.