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April 13, 2011

The Physician EHR Incentive Does Not Have To Be Taxable to the Physician

Filed under: EHR Incentive — HankMayers @ 3:42 pm

Now that more of the EHR incentive application process is known, I have discovered one piece of very encouraging news:

Under certain circumstances, the EHR Incentive payment may NOT be taxable to the physician as personal income! Here is how it works:

Essentially, the physician can assign his/her incentive payment to any party, including a practice PLLC. This is accomplished by, when registering for the incentive, the physician would provide the PLLC’s TIN (generally a FEIN) as the party to which the payment is to be made. The incentive becomes a business income item, to be taxed in the normal course of the costing etc and taxation liabilities of the practice. For many physicians, this will make a big difference.

Or, the physician can also select the FEIN for the group practice that is incurring the HIT/EHR expense for the entire practice. This arrangement should be documented via a formal agreement between the practice and the physician.

The physician can make a TIN designation each year, but only once per year. This allows a re-designation for a subsequent year in the event that the physician changes practice. To be able to continue to receive the incentive when the TIN changes, there must be a certified EHR in operation at the new location, and the physician must remain a meaningful year for the rest of the “move” year.

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