Branded Prescription Drug Sales Part 2 of 3

Section 9008(a) imposes the fee on each covered entity engaged in the business of manufacturing or importing branded prescription drugs. Section 9008(d)(1) defines a covered entity as “any manufacturer or importer with gross receipts from branded prescription drug sales.” For purposes of section 9008(a), a manufacturer or importer is the person identified in the Labeler Code of the National Drug Code (NDC) for a branded prescription drug. The NDC is an identifier assigned by the Food and Drug Administration (FDA) to a branded prescription drug, as well as other drugs. The Labeler Code is the first five numeric characters of the NDC or the first six numeric
characters when the available five-character code combinations are exhausted.

Section 9008(d)(2) provides a controlled group rule under which all persons treated as a single employer under section 52(a), 52(b), 414(m), or 414(o) of the Internal Revenue Code (Code) shall be treated as a single covered entity.

For this purpose, a foreign entity subject to tax under section 881 is included within a controlled group under section 52(a) or 52(b). This controlled group rule will be applied as of the end of the day on December 31 of the sales year. All persons treated as a single employer under section 9008(d)(2) are jointly and severally liable for the fee. See section 9008(d)(3). In the case of a controlled group that is treated as a single covered entity under section 9008(d)(2), the controlled group must identify a single person as the “designated entity” that may act for the controlled group with respect to the section 9008 fee. If the controlled group, without regard to foreign corporations included under section 9008(d)(2)(B), is also an affiliated group that filed a consolidated return for federal income tax purposes, the designated entity is the common parent of the affiliated group as identified on the tax return filed for the sales year.

In all other situations, the controlled group must select a person as the designated entity on Form 8947, Report of Branded Prescription Drug Information1 (discussed further below), which is signed by the designated entity under penalties of perjury, stating that all the manufacturers or importers of branded prescription drugs who are members of the covered entity have consented to the selection of the designated entity.

Sales taken into account go to Section 9008(b) provides that the annual fee for each covered entity is calculated by determining the ratio of (i) the covered entity’s branded prescription drug sales taken into account during the preceding calendar year to (ii) the aggregate branded prescription drug sales taken into account for all covered entities during the same year, and applying this ratio to the applicable amount as specified in the statute. “Sales taken into account” means sales exclusive of certain orphan drugs and after application of the percentage adjustment table in section 9008(b)(2). Section 9008(b)(1) provides that the calculation of the fee in any given year is based on branded prescription drug sales in the immediately preceding calendar year.

1 The Office of Management and Budget approved Form 8947 under control number 1545-2192.
Section 9008(b)(3) provides that the Secretary of the Treasury shall determine the amount of each covered entity’s fee. In determining that amount, the Secretary may rely on reports submitted by the Agencies and any other source of information. Section 9008(i) also provides the Secretary with regulatory authority to carry out the purposes of the statute.

The IRS and Treasury Department have determined that, although the DOD and VA are expected to have complete data on branded prescription drug sales for the calendar year immediately preceding the fee year within the time frame necessary to administer the fee, CMS is not expected to have comparable data because it cannot complete its data processing within the necessary time frame. Accordingly, the IRS and Treasury Department will calculate the fee based on the branded prescription drug sales data provided by the Agencies for the second calendar year preceding the fee year. Because the use of the second preceding year, rather than the immediately preceding year, as the sales year may affect the amount of the fee paid by any
particular covered entity, the fee due in every year after 2011 will include an adjustment
amount.

An adjustment amount will be calculated for each NDC and will be added or subtracted, as appropriate, to the fee otherwise payable by the covered entity responsible for the NDC in the fee year in which the adjustment is calculated. The adjustment amount added or subtracted to the amount payable in a fee year will reflect the difference between the fee determined for the NDC in the immediately prior fee year, using data from the second calendar year preceding that fee year, and what the fee for that NDC would have been for the immediately prior fee year using data from the calendar year immediately preceding that prior fee year. For example, the amount due from a covered entity in the 2012 fee year will include an adjustment amount for each
NDC for which the covered entity is responsible in 2012 equal to the difference between
the 2011 fee associated with that NDC using 2009 data, and what the 2011 fee for that
NDC would have been using 2010 data.

To calculate the adjustment amount for an NDC, the IRS will first determine two
ratios: one based on data from the second preceding calendar year; and the other
based on data from the third preceding calendar year. In both cases, the numerator of
the ratio is the sales taken into account for the particular NDC during the relevant
calendar year, and the denominator of the ratio is aggregate branded prescription drug
sales taken into account for all NDCs during the relevant calendar year. For each NDC,
the IRS will then take the difference between the ratio using second preceding year data
and the ratio using third preceding year data and multiply that amount by the applicable
amount of the fee for the relevant fee year, as set forth in section 9008(b)(4), to determine an adjustment for the NDC. The adjustment amount for any particular NDC will then be added to, or subtracted from, as appropriate, the amount of the fee otherwise payable by the covered entity associated with the NDC for the fee year in which the adjustment amount is calculated.

For example, in 2012 the fee payable by each covered entity will consist of two components. First, the applicable amount for 2012 will be allocated to the covered entities based on sales data for 2010 (i.e., the second preceding calendar year).

Second, an adjustment amount will be calculated in 2012 for each NDC with respect to the 2011 fee year, by multiplying (i) the difference between the sales ratio determined using 2010 data and the sales ratio determined using 2009 data by (ii) the applicable amount of the fee for 2011. The adjustment amount for each NDC will then be added to, or subtracted from, as appropriate, the fee otherwise payable in 2012 by the covered entity associated with the NDC for the 2012 fee year.

The adjustment amount is applied only with respect to the amount of the fee otherwise payable by the relevant covered entity in the year in which the adjustment is calculated, and is not a refund, credit, or recalculation of a fee payable by any covered entity in any preceding fee year. In any given fee year, the amount assessed by the IRS will be based on data provided to it by the Agencies. The IRS does not intend to recalculate either the fee allocations or the adjustment amounts based on data that becomes available after those amounts are assessed.

The final article will be about the information requested from covered entities, information provided by the agencies and fee calculations.

As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.

Branded Prescription Drug Sales Part 1 of 3

Notice 2010-71

This notice provides guidance on the annual fee imposed on covered entities
engaged in the business of manufacturing or importing branded prescription drugs by
section 9008 of the Patient Protection and Affordable Care Act (ACA), Public Law 111-
148 (124 Stat. 119 (2010)), as amended by section 1404 of the Health Care and
Education Reconciliation Act of 2010 (HCERA), Public Law 111-152 (124 Stat. 1029
(2010)). All references in this notice to section 9008 are references to section 9008 of
the ACA, as amended by section 1404 of HCERA.

Part I of this notice describes a proposed methodology for calculating the section
9008 fee. Part II of this notice describes how the Internal Revenue Service (IRS) will
use this proposed methodology to provide each covered entity with a preliminary 2011
fee calculation. The IRS and Treasury Department intend that a covered entity’s
preliminary fee calculation for 2011 will serve as a basis for comments by the covered
entity on the proposed methodology. Part III of this notice solicits public comments on
all aspects of the notice.

Part I – Proposed Methodology for Calculating the Fee

Section 9008(b)(4) sets an applicable fee amount for each year, beginning with
2011, that will be allocated among covered entities with aggregate branded prescription
drug sales of over $5 million to specified government programs or pursuant to coverage
under such programs. Section 9008(e)(2) provides that “branded prescription drug”
means (i) any prescription drug the application for which was submitted under section
505(b) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(b)), or (ii) any
biological product the license for which was submitted under section 351(a) of the
Public Health Service Act (42 U.S.C. 262(a)). The specified government programs are
the Medicare Part B program, the Medicare Part D program, the Medicaid program, any
program under which branded prescription drugs are procured by the Department of
Veterans Affairs, any program under which branded prescription drugs are procured by
the Department of Defense, and the TRICARE retail pharmacy program (collectively,
the Programs). The applicable fee amount is allocated among the covered entities
using a formula specified in section 9008(b) based on sales to the Programs, which
sales data is to be provided by the Centers for Medicare and Medicaid Services of the
Department of Health and Human Services (CMS), the Department of Veterans Affairs
(VA), and the Department of Defense (DOD) (collectively, the Agencies).

There are two years relevant to the calculation of the section 9008 fee – the
calendar year in which the fee must be paid (herein referred to as the fee year) and the
calendar year of the branded prescription drug sales, which will be used to determine
the amount of the fee (herein referred to as the sales year). As discussed more fully
below, the IRS and Treasury Department are proposing to use the second calendar
year preceding the fee year as the sales year for purposes of calculating the section
9008 fee. An adjustment amount will also be calculated as discussed below.
The next article will cover the definition of covered entities, sales taken into account and the adjustment methodology.

As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.

Are you Networking your Clients?

When we are out and about looking for new business we are usually networking with other business people in the community you need to make sure you build a very good relationship with them ahead of time. Some business owners really dread this type of marketing for their business. They would rather spend the money on print advertising or even pay through the nose for media advertising. Some people really think of this as work.

I think of it as net enjoy. You might say wow you are twisted!!. I laugh and say yes I am at different times of the year especially during tax season when sleep is an option. I am the type of person who likes to have everything set and organized but when it comes to networking to build my sales force and customers. I take my time to get to know the business owners to make sure I want to work with them and that we are a good fit for each other. I interview them just as if they were coming to work for me. I make sure they are not the type of a business that will want me to push it to the limit to where my ethics and license may be put on the line. If I ask them questions about some aspect of their business or personal life and they squirm with the answers then they might actually not be the right client for me and my business.

You might ask why do you spend the time interviewing them? Well I do this because during this process of networking I actual enjoy this time to start to build that relationship. I will be sure that once I perform an accounting or tax service for them that they will be on my sales team whether they know it or not. They will be so impressed with the service I give them that they want to give me a referral based on my relationship with them not just because of my ethics and integrity.

This process I start with them is based on Business Network International (BNI) VCP process in order to grow your business clients. I totally agree with this process and have built my business to 95 % of my business clients based on this networking technique. If you are ever in the State of NM and would like to visit with me please email I and we can schedule a time to chat.

As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.

A surprise tax cut for the (almost) rich

Are you worried about your taxes going up next year? They might for some high earners. But some not-quite-rich taxpayers could end up with a surprise tax cut.

If the Bush tax cuts expire for the nation's top earners, people making a pinch less than the wealthiest Americans, who don't quite qualify for the new top two tax brackets, could find themselves in an even lower bracket next year.

The White House says you’re wealthy if you make $250k a year. But what about cost of living?

"We should end up with a sweet spot in the middle of the higher income brackets," said Robert Kerr, senior director of government relations at the National Association of Enrolled Agents. "This is an unintended benefit of the new plan that many people don't realize."

The government is defining the wealthiest Americans as individuals with taxable income of more than $195,550, ($200,000 in adjusted gross income) and joint filers with taxable income over $237,300, ($250,000 in adjusted gross income).

These taxpayers could be hit with higher tax bills next year as the tax rates for the top two brackets return to pre-Bush administration levels of 36% from 33%, and 39.6% from 35%.

But under Obama's tax plan, the 28% income tax bracket would be widened. According to estimates from Congress's Joint Committee on Taxation, if your taxable income is between $171,850 and $195,550, you would fall into this "sweet spot" and be moved from the 33% tax bracket to the 28% bracket and could end up saving more than $1,000 a year.

Does $250,000 make you rich?

Say you're a single filer with a taxable income of $195,550, taking one personal exemption and a basic standard deduction.

In 2010 you fell into the 33% tax bracket and paid $49,648 in income taxes. But if Obama's tax plan is passed, you will drop down to the 28% tax bracket and will owe $48,310, resulting in a $1,338 tax savings.

That goes for joint filers too. Those with income between $209,250 and $237,300 will also move into the 28% bracket. So joint filers making $237,300 will owe $54,399 under Obama's plan, $1,691 less than the $56,090 they owed this year.

As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.

Obama’s Coming Tax Hikes Will Cripple the Economy

Rather than be in the middle of a “recovery summer,” the U.S. economy is still flat on its back. It’s likely to get worse after the first of the year, thanks to the tax hikes the White House is planning.

Americans for Tax Reform, a nonprofit taxpayers’ interest group, reports that the Obama administration, with the support of congressional Democrats, “have said they want to raises taxes in the top two income tax rates in January 2011.” Under their plan, the group says, the current 33 percent rate will automatically rise to 36 percent and the 35 percent rate will increase to 39.6 percent, negatively affecting families and small business owners earning at least $200,000 per year.

The impact of these tax increases will be felt throughout the economy but particularly in the small business sector, where much of the nation’s job creation comes during an economic recovery. The reason for this is:

1. Unlike corporations, small businesses usually don’t pay their own taxes. Rather, business profits flow through to the business owner. The business owner pays taxes on their small business by adding the profits to the personal income tax forms. Therefore, personal income taxes are the same thing as small business taxes.

2. According to the IRS, most small business profits pay taxes in households making more than $200,000 per year. The IRS keeps track of two types of small business income: sole proprietors, and “pass-through” entities like partnerships and S-corporations.

3. Mature small businesses make a majority of the profits and employ a majority of the workers. The Census Bureau reports that the top 3 percent of small businesses employ a majority of everyone who works for a small business. Raising taxes on these most successful of small businesses will cost jobs.

According to a number of estimates, a majority of U.S. small business profits will face a tax rate hike under the Obama plan. Instead of putting profits back into the business in the form of equipment updates, new hires, and expansion, the small businessmen and women who make up the backbone of our economy will be called upon to underwrite, in the name of “raising taxes on the rich,” Washington’s addiction to overspending

As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.

Tax preparers regroup after IRS moves to limit refund loans

A decision from the Internal Revenue Service last week is to stop providing taxpayer-debt profiles comes as brick-and-mortar tax preparers already are struggling to hold on to their ground against electronic services, such as TurboTax.

Without the so-called "debt indications" from government data, tax preparers and banks will find it more difficult to front controversial loans known as refund-anticipation loans, or RALs, which are secured by a filer's expected tax refund.
Tax preparers face additional hardship as their banking partners that back the RALs drop out of the business.

Shares of H&R Block Inc. have lost 37% this year, while Jackson Hewitt Tax Services Inc.'s stock is off more than 80%. TurboTax owner Intuit Inc. on the other hand, has seen its shares rise 26% this year.

The long road to recovery

While consumer groups hailed the IRS move earlier this month as a step toward ending a predatory-lending practice, national chains such as H&R Block and Jackson Hewitt won't easily exit the lucrative business and say the effort may even backfire with higher fees, hurting consumers.

In reaction to the decision on the taxpayer-debt profiles, Jackson Hewitt founder John Hewitt said that a portion of the 8 million to 9 million RAL customers will no longer qualify for loans without the government data available.

Those who do qualify will face steeper fees; Hewitt sees tax preparers charging $100 to $110 more, or about a 60% jump, in RAL prices.

What's missing from the IRS announcement is that 40% of RAL recipients don't have bank accounts; only those able to receive direct deposits get refunds back in 10 days.

H&R Block extended 2.1 million RALs in 2010, each with an average amount of $3,000 issued for 10 to 11 days. Each RAL costs about $62, or 2.1% of the loan amount.

Expensive loans

The RAL-related fees siphoned $738 million from 8.4 million American taxpayers in 2008. People who seek such advances are often the working poor who are strapped for cash.

RAL taxpayers receive money on the spot, as opposed to having to wait for a refund check in the mail. But this convenience comes at a hefty price and costs the very taxpayers who need the money in the end. As you notice the companies who offer these types of loans haven’t gone out of business by doing so. Maybe these companies could actually offer these types of loans as a free service to help those very tax payers who have been faithful customers that they have been making several hundred million dollars off of them. Does the president/company actually have to make that much money in one year; couldn’t they not take a pay increase while several hindered thousand taxpayers don’t have that option in today’s economy?

As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.

Six Tax Tips for Recently Married Taxpayers

Are you or have you gotten married this summer? If you recently got married or are planning a wedding, the last thing on your mind is taxes. However, there are some important steps you need to take to avoid stress at tax time. Here are six tips for newlyweds to keep in mind.

1) Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple.

2) File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form is available on SSA’s website at www.socialsecurity.gov, by calling 800-772-1213 or at local offices.

3) Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from IRS.gov or order it by calling 800–TAX–FORM (800–829–3676). Or you can always ask myself or your tax professional for assistance.

4) Notify the U.S.Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.

5) Notify Your Employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.

6) Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee's Withholding Allowance Certificate, you can print out and give to your employer so they can withhold the correct amount from your pay.

As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.