Frequently Asked Questions- Blue Cross and Blue Shield of Texas

Financial/Tax planning services help businesses grow by calculating the taxes properly and also at the same time give you suggestions in order to plan your finances in the best possible way. Q. Can carriers delay or deny claims processing if they are waiting on information from the member? For members subject to Prompt Pay Legislation, BCBSTX can request information from the treating physician without finalizing claim payment. If there is any other information needed from another source, we will not delay payment. Upon receipt of the additional information from the other source, if the information alters our decision, additional payment or refund notice will be issued accordingly. You should send your request to the same address you filed the claim, which will be BCBSTX in most instances.

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It only benefits you to itemize when the total of all of your deductions exceeds the standard deduction for your filing status. Otherwise, you would be paying taxes on more income than you should. As other options, such as gathering investors, even though would bring in the money, the company has to pay dividends, and dividends paid to equity investors are not deductible for tax purposes. Since interest expenses are tax deductible, tax shields are crucial because businesses can profit from the formulation of such activities. Examples of tax shields include deductions for mortgage interest that you pay on your mortgage loan.

Examples of Tax Shields

The member’s BCBS plan will notify BCBSTX on how to apply the member’s benefits to the claim. Based on the information, do the calculation of the tax shield enjoyed by the company. You’ll also be taxed on compensation you received through bartering. Let’s say you exchange one product or service for another—maybe you find someone with whom you trade your sofa for a new armchair.

The tax shield formula

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However, such providers are not entitled to penalties under the Texas Prompt Pay Legislation, as such penalties are only available to preferred providers. Please see the Texas Department of Insurance’s Prompt Pay FAQ for more information. This is a very important tax shield to consider when you’re planning for tax savings. If your medical expenses are nearing 10% of your income, you might want to have surgery before the new year to push you over the threshold. If your medical expenses are already over 10%, you might want to postpone the surgery until after the new year so you can get closer to the threshold for the following year. Again, this might be a good area in which to speak with a tax professional.

If you use good tax software, it will automatically prompt you to use the best deductions and strategies. You may have heard that a large charitable donation was “just a tax write-off.” This is partially true, since donating to approved charities can be written off of business taxes. However, keep in mind that, based on the tax shield formula, the tax shield is just the donation multiplied by the tax rate.

• It’s an allowable deduction that you can take from your taxable income.
• Claim information is transmitted to a member’s plan electronically.
• When a business saves money on taxes directly from paying interest on debt, this is referred to as an interest tax shield.
• These are the tax benefits derived from the creative structuring of a financial arrangement.
• Make sure you have the most current copy of the member’s ID card.

Let us take the example of another company, PQR Ltd., which is planning to purchase equipment worth $30,000 payable in 3 equal yearly installments, and the interest is chargeable at 10%. The company can also acquire the equipment on lease rental basis for $15,000 per annum, payable at the end of each year for three years. The original cost of the equipment would be depreciated at 33.3% on the straight-line method. Purchase of Equipment on Debt or Purchase of Equipment on Lease. Now that you know how to use them, don’t spend all your time calculating tax shields. Most require significant expenses that need to be considered along with other factors.

• The original cost of the equipment would be depreciated at 33.3% on the straight-line method.
• The corporate tax rate has been reduced to a flat 21%, starting in 2018, and personal tax rates have also been reduced.
• You can deduct up to $750,000 of home mortgage interest in 2023.
• This can be done with a few of the tax shields below, such as interest and hiring your kids.
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• The value of a tax shield is calculated as the amount of the taxable expense, multiplied by the tax rate.

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• Keep in mind we’re talking about tax avoidance, not tax evasion.
• Over the life of the loan, the interest on the debt costs $16,067, which shields Kelsey’s from $3,374 ($88,200 – $84,825.93) in taxes.
• The ability to use a home mortgage as a tax shield is a major benefit for many middle-class people whose homes are major components of their net worth.
• By using debt, you put less equity into the transaction, and the interest paid on the debt shields the return from taxes.
• To access BCBSTX general reimbursement information policies, request forms for allowable fees and fee schedule information, visit the General Reimbursement Information section of the site.
• Amortization is when you split a loan into regular payments over a predetermined length of time (known as an amortization schedule).

Both individuals and corporations are eligible to use a tax shield to reduce their taxable income. This happens through claiming deductions such as medical expenses, mortgage interest, charitable donations, depreciation, and amortization. Taxpayers can either reduce their taxable income for a specific year or choose to defer their income taxes to some point in the future.

• Q. Is there a limit to how far back BCBSTX will request a refund?
• Similar to the tax shield offered in compensation for medical expenses, charitable giving can also lower a taxpayer’s obligations.
• The tax shield is a very important aspect of corporate accounting since it is the amount a company can save on income tax payments by using various deductible expenses.
• You should send your request to the same address you filed the claim, which will be BCBSTX in most instances.
• The most common depreciative assets include your house and your vehicle—these are things that naturally get worn down over time, and so they become less valuable.
• The term “tax shield” references a particular deduction’s ability to shield portions of the taxpayer’s income from taxation.