Top 10 IRS Tax Tips for 2010

It’s that time of the year again, the income tax filing season has begun and important tax documents should be arriving in the mail. Even though your return is not due until April, getting an early start will make filing easier. Here are the Internal Revenue Service’s top 10 tips that will help your tax filing process run smoother than ever this year.

1. Start gathering your receipts and records Round up any documents or forms you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.
2. Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.  They have to be mailed by January 31, 2011.
3. Use Free File: Let Free File do the hard work for you with brand-name tax software or online fillable forms. It’s available exclusively at http://www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $58,000 or less, you qualify for free tax software that is offered through a private-public partnership with manufacturers. If you made more or are comfortable preparing your own tax return, there’s Free File Fillable Forms, the electronic versions of IRS paper forms. Visit www.irs.gov/freefile to review your options.
4. Try IRS e-file: After 21 years, IRS e-file has become the safe, easy and most common way to file a tax return. Last year, 70 percent of taxpayers – 99 million people – used IRS e-file. Starting in 2011, many tax preparers will be required to use e-file and will explain your filing options to you. This is your chance to give it a try. IRS e-file is approaching 1 billion returns processed safely and securely. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, combine e-file with direct deposit and you get your refund in as few as 10 days.
5. Consider other filing options There are many different options for filing your tax return.You can prepare it yourself or go to a tax preparer. You may be eligible for free face-to-face help at an IRS office or volunteer site. Give yourself time to weigh all the different options and find the one that best suits your needs.
6. Consider Direct Deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than waiting for a paper check. It is usually deposited into the bank account you have selected within a couple of weeks of electronically filling it.
7. Visit the IRS website again and again The official IRS website is a great place to find everything you’ll need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes.  As some of you know the Congress changed the tax laws in the middle of tax season so you need to be made aware of any possible changes they have done.
8. Remember this number: 17 Read IRS Publication 17, Your Federal Income Tax on the IRS website. It’s a comprehensive collection of information for taxpayers highlighting everything you’ll need to know when filing your return.  There is a wealth of information in this publication and can usually only be read a couple of pages at a time since it can be boring after awhile.
9. Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes will slow down the processing of your return an then you will receive a letter from the IRS about the mistake.  If it is just a calculation on they will correct it then send your refund if one is due.  Be sure to double-check all the Social Security Numbers and math calculations on your return as these are the most common errors made by taxpayers.  I would process your taxes, then set them aside and look at them at least twice before you finally send them in to make sure you have all items needed.
10. Don’t panic! If you run into a problem, remember I can assist you with your tax filing needs(rondazaragoza@gmail.com 505-550-2621) or the IRS is here to help. Try http://www.irs.gov or call toll-free at 800-829-1040.

 

Networking During the Holidays and Special Events Part 3

As stated previously word-of-mouth advertising as you know this is one of the oldest and most powerful forms of marketing for the value you receive back from the time invested.  The previous suggestions in part 1 were: always have your networking tools with you, set a goal for the number of new people you want to meet at the events, act like a host not a guest at the events, and finally to listen then ask the 5 W questions.  In part 2 I wrote about giving a lead or referral whenever you can, describe your product or service, exchange business cards with the people you meet at the events, and spend 10 minutes or less with each person you meet at the events, don’t linger with your friends and associates.

During the holiday season and special events you should make sure your follow the final suggestions to be an effective networker so future customers can learn about your business.

1. Write comments on the back on the business cards you collect.  This process will help you remember the person later on when you look at the business card.  I don’t know of a lot of people who can recall a 10 minute or less conversation of potentially 20 people a few days later when you need.  A couple of examples of short notes:

“wants to attend a BNI chapter meeting”

“is a baseball fan”

“likes to hike”

Write down anything that will help you remember the conversation or that can help you do business with you.

1. Follow up with the people you meet.  Remember that outstanding follow-up is the key to effective networking.  You can follow the first nine suggestions to the t but if you don’t do this step you are wasting your time networking.  If you promise to get back with people make sure you do it or your reputation can be hurt.  Even if you don’t promise to call them do it anyway or send them a note or letter.  If you follow-up your networking can be very empowering.
2. Keep a copy of this posted in a visible place so you can review before you go to any networking event or holiday party.  Ok now you have a total of ten suggestions on how to network during the holidays or special events.  Go get them!!

 

Networking During the Holidays and Special Events Part 2

As stated previously word-of-mouth advertising as you know this is one of the oldest and most powerful forms of marketing for the value you receive back from the time invested into it..  The previous suggestions were: always have your networking tools with you, set a goal for the number of new people you want to meet at the events, act like a host not a guest at the events, and finally to listen then ask the 5 W questions.

During the holiday season and special events you should make sure your follow the following four suggestions to be an effective networker so future customers can learn about your business.

1. Give a lead or referral whenever you can.  Outstanding networkers believe in the givers gain philosophy.  If you don’t really attempt to help the people you meet then you really aren’t networking.  Sometimes you may need to be creative in this area.  If you can’t give a lead or referral then you may need to give them other type of information that may be in need of them.   An example of this maybe of a speaker you know about who they are trying to get a contract with for their business.  You could also tell them of other ways to grow their business.  The more you try to help people, the more they will remember you in a positive way.  You will then become a source of information where people go when they need help.
2. Describe your product or service.  After you learn about what the other person does then you describe your business.  Be specific but brief.  Use memory hooks or your lowest common denominator for your business.  Try to do it in 60 seconds or less.  This seems to be the attention span of some people when you are talking to them about your business.
3. Exchange business cards with the people you meet at the events.  Ask for two cards; one for you and one for you to give away as a referral.  This sets the stage for networking to start to happen.  When the business cards are used properly, the cards can be instrumental in helping you remember people, initiate follow up, learn opportunities, and access information and resources for your own clients.
4. Spend 10 minutes or less with each person you meet at the events, don’t linger with your friends or associates.  Remember suggestion # 2- if you set a goal to meet a certain amount of people you have to make sure you allocate the correct amount of time to accomplish your goal.  Besides the person you are talking to also needs to meet others also.  Don’t spend your entire time with just one person.

Learn to leave conversations gracefully.  Tell them that you have a few more people to meet, your drink needs to be refreshed, or you want to sample the appetizers.

Ok now you have a total of eight suggestions on how to network during the holidays or special events.  Come back for the final two suggestions and wrap up.

Networking During the Holidays and Special Events Part 1

Word-of-mouth advertising as you know this is one of the oldest and most powerful forms of marketing for the value you receive back from the time invested into it. During the holiday season and special events you should make sure your follow the following four suggestions to be an effective networker so future customers can learn about your business.

1. Always have your networking tools with you. Most people who are great networkers always have their networking supplies with them. Those supplies include an information name badge, plenty of business cards, brochures about your business, a pocket sized business card holder of business professionals you refer to, and a small bottle of germ killer. Make sure you have a professionally made name tag since they look much better than a stick on name tag. It should include your name and your business name or profession whichever one you would prefer. You should never run out of business cards while at these events.

2. Set a goal for the number of new people you want to meet at the events. Some people go to these events with only one goal in mind- what time they want to leave? Your goal should be set for the number of contacts you make or the number of business cards you receive. Don’t leave the event until you meet your goal. You need to be realistic. If you are having a bad day set a lower goal than you have on the days when you are having a great day. With either case, set a reachable goal based on the attendance and the type of group you are attending.

3. Act like a host and not a guest of the event. You should pretend it is your party you are attending. You should stand near the main door to meet the people and then introduce them around the event. If you can volunteer to be an ambassador or greater at the events you attend or are a member. This will help you gain more valuable networking skills and get great exposure at the same time. Networking can be a 24/7 activity if done correctly. Don’t limit your to networking just at receptions you attend. You can network anywhere.

4. Listen then ask the 5 W questions- Who, What, When, Where, & Why. A great networker has two ears and one mouth and they use them proportionally. You should show a genuine interest in the other persons business or products. You should find out as much as you can about their business by asking the 5 W questions. He answers they give you will give you a better grasp on their business and how you can work with them in the future. This also gives you a better definition on what other networking events you can invite them to in the future and how to refer them to other businesses. Come back for the next set of suggestions to improve your networking during the holidays and other special events.

Branded Prescription Drug Sales Part 3 of 3

Information Requested from Covered Entities from Notice 2010-71

Annually, each covered entity should submit a Form 8947 and provide the information specified by the form and instructions. The designated entity for a covered entity described in section 9008(d)(2) submits a single form for the covered entity. A covered entity should submit a completed Form 8947 by December 15 of each year unless an alternative date is prescribed by the form or instructions. The Form 8947 information is return information subject to the confidentiality protections of section 6103. Form 8947 is available at http://www.irs.gov.

Form 8947 solicits the following information from each covered entity:

1. For a single-person covered entity, the covered entity’s name, address, and employer identification number. For a covered entity described in section 9008(d)(2), the name, address, and employer identification number of the designated entity and each manufacturer or importer with gross receipts from the sale of branded prescription drugs that was included in the covered entity as of the end of the day on December 31 of the sales year.

2. All of the NDCs for branded prescription drugs in which the covered entity is identified in the labeler code as of the end of the day on December 31 of the sales year. For a covered entity described in section 9008(d)(2), this includes all NDCs in which a member of the covered entity is identified in the labeler code as of the end of the day on December 31 of the sales year.

3. The brand name and NDC for each orphan drug for which the covered entity was allowed a section 45C credit. For purposes of section 9008(e)(3), the credit was “allowed” for any particular drug if the covered entity claimed the credit and there has not been a final assessment or a court order disallowing the full credit taken for the drug. In addition, even if the credit has been allowed, a covered entity must not report an NDC for an orphan drug for any sales year following the calendar year in which the FDA approved the drug for marketing for any indication other than the treatment of the rare disease or condition for which the section 45C credit was allowed.

4. The rebates for each NDC paid in the sales year by the covered entity to Medicare Part D with respect to sales occurring in that sales year. For this purpose, a rebate is considered paid in the sales year if it is taken into account on the covered entity’s tax return(s) for the sales year. This information is needed for the 2009 sales year because, at this time, CMS does not have rebate data on branded prescription drug sales by NDC. However, starting in 2011, CMS is planning to collect this rebate information by NDC for the 2010 and subsequent sales years. It is therefore possible that covered entities will not report this rebate information for years following 2009.

5. The state supplemental rebates for each NDC paid in the sales year by the covered entity with respect to sales under Medicaid occurring in that sales year. For this purpose, a rebate is considered paid in the sales year if it is taken into account on the covered entity’s tax return(s) for the sales year. This information is needed because Medicaid data will not include state supplemental rebates. Information Provided by the Agencies The IRS will compile a list of branded prescription drugs by NDC using the data submitted on Forms 8947. Appropriate due diligence will be performed to check for potential oversights. For example, the IRS may use information published by the FDA identifying drugs for which applications were submitted under section 505(b) of the Federal Food, Drug, and Cosmetic Act. The IRS will provide the Agencies with the compiled list of branded prescription drugs. For each year in which the fee is due, the Agencies will provide data to the IRS on the branded prescription drug sales during the sales year by Program and NDC. The calculation methodology for each Program, including any reasonable estimation techniques and assumptions that the Agencies expect to use, are described below.

1. Medicare Part D. Section 9008 requires CMS to report the product of the perunit ingredient cost reported by Part D sponsors (net of any per-unit rebate or other price concessions) and the number of units for each branded prescription drug. CMS currently collects prescription level encounter data from Part D sponsors on the Prescription Drug Event (PDE) records. On the PDE records, Part D sponsors report the NDC, as well as the ingredient cost, dispensing fee, sales tax, and units. CMS will aggregate the ingredient cost reported in the “Ingredient Cost Paid” field and the units reported in the “Quantity Dispensed” field of the PDE records for Part D covered drugs. These amounts will be aggregated at the NDC level for each sales year. Only PDE data that Part D sponsors have submitted by the PDE submission deadline (within 6 months after the end of the sales year) and have been approved for inclusion in the Part D payment reconciliation will be included.

2. Medicare Part B. First, for Healthcare Common Procedure Coding System (HCPCS) codes that consist solely and exclusively of branded prescription drugs (as identified by their respective NDCs) manufactured by a single entity, CMS will provide the total Medicare-allowed charges for the HCPCS code for the appropriate sales year.

Second, for HCPCS codes consisting of a mixture of branded prescription drugs made by different manufacturers or a mixture of branded prescription and generic drugs, CMS will determine: (i) the total Medicare-allowed charges for the HCPCS code for the appropriate sales year; (ii) the entities engaged in manufacturing each NDC assigned to the HCPCS code; and (iii) those entities (if any) that are manufacturing branded prescription drugs. CMS will then: (i) estimate the amount of Medicare-allowed charges for each manufacturer by applying the utilization percentage attributed to each manufacturer as determined under the Medicare Part B Program using manufacturer reported Average Sales Price sales data; (ii) multiply that percentage by the Medicare allowed charge for that HCPCS code; and (iii) assign the result to each manufacturer within that HCPCS code.

Third, for the remainder of HCPCS codes that consist of multiple branded prescription drugs (as identified by their respective NDCs) manufactured by multiple entities that cannot be reliably calculated using the two methods above, CMS will determine: (i) the total Medicare-allowed charges for the HCPCS code for the appropriate sales year; (ii) the entities engaged in manufacturing each NDC assigned to the HCPCS code; and (iii) those entities (if any) that are manufacturing branded prescription drugs. CMS will then: (i) estimate the amount of Medicare-allowed charges for each manufacturer by applying the utilization percentage attributed to each manufacturer as determined under the Medicare Part D Program; (ii) multiply that percentage by the Medicare-allowed charge for that HCPCS code; and (iii) assign the result to each manufacturer within that HCPCS code. Thus, the amounts attributed to branded prescription drugs within the HCPCS code will be estimated. CMS will calculate the sum of these components to arrive at an estimate of Medicare Part B spending on branded prescription drugs for each manufacturer.

3. Medicaid. The branded prescription drug sales for Medicaid may be determined as the per-unit Average Manufacturer Price less the Unit Rebate Amounts (URA) that CMS calculates based on manufacturer-reported pricing data multiplied by the number of units reported billed by states to manufacturers. This data would be based on the data reported to Medicaid by covered entities and the states. CMS does not currently intend to reduce this calculation for state supplemental rebates.

4. Department of Veterans Affairs. VA will provide, by NDC, the total amount paid for each branded prescription drug procured by the VA for its beneficiaries. The basis of this information will be national procurement data reported by VA’s Pharmaceutical Prime Vendor to the VA Pharmacy Benefits Management Service and National Acquisition Center. This information will not include procurement data that resides exclusively at the individual medical treatment facility level.

5. Department of Defense. The DOD will provide, by Labeler Code, the manufacturer’s name, the NDC, brand name, and the amount paid (net of rebates) for each branded prescription drug procured by DOD. TRICARE Management Activity will provide, by Labeler Code, the manufacturer’s name, the NDC, brand name, and the amount paid (net of refunds or rebates) for each branded prescription drug procured by DOD through the TRICARE Retail Pharmacy Program. Fee calculation After receiving data from the Agencies and information from the covered entities, the IRS will calculate each covered entity’s branded prescription drug sales for each Program by NDC. A covered entity’s branded prescription drug sales for each Program will equal (i) the sum of all the covered entity’s branded prescription drug sales reported by the Program, less (ii) the sum of all branded prescription drug sales reported by the Program for each NDC for which the covered entity has appropriately claimed the orphan drug exclusion, less (iii) the sum of rebates reported by the covered entity on Form 8947 for the sales year. After calculating the branded prescription drug sales for each Program, the IRS will calculate each covered entity’s branded prescription drug sales taken into account for purposes of the ratio set forth in section 9008(b)(1). A covered entity’s branded prescription drug sales taken into account for purposes of section 9008(b)(1)(A) will equal the sum of the covered entity’s branded prescription drug sales for all Programs reduced by the appropriate percentages set forth in section 9008(b)(2). The IRS will then calculate the aggregate branded prescription drug sales of all covered entities taken into account for purposes of section 9008(b)(1)(B), which is the sum of all the covered entities branded prescription drug sales taken into account for purposes of section 9008(b)(1)(A). To determine each covered entity’s fee, the IRS will divide each covered entity’s branded prescription drug sales taken into account for purposes of section 9008(b)(1)(A) by the aggregate branded prescription drug sales of all covered entities taken into account for purposes of section 9008(b)(1)(B) and multiply that fraction by the applicable amount for the appropriate year as set forth in section 9008(b)(4). Part II – Preliminary Fee Calculation for 2011 The IRS will use the proposed methodology described in Part I to provide each covered entity with a preliminary 2011 fee calculation.

The notification of the preliminary fee calculation will include the following: (1) the covered entity’s fee; (2) the covered entity’s branded prescription drug sales, by NDC, for each Program; (3) the covered entity’s branded prescription drug sales taken into account after application of section 9008(a)(2); and (4) the aggregate branded prescription drug sales taken into account for all covered entities. To facilitate the preliminary 2011 fee calculation, Form 8947 should be submitted to the IRS by January 20, 2011. From the data on the Forms 8947, the IRS will compile a list of NDCs and provide that list to the Agencies by March 1, 2011.

The IRS will use the data submitted on the Forms 8947 and the sales data provided by the Agencies to calculate the preliminary fee and will send to each covered entity notification of its preliminary fee calculation by May 2, 2011. If the IRS and Treasury Department subsequently promulgate regulations that modify the methodology for calculating each covered entity’s fee, the modified methodology will be adopted in determining the final fee amount for each covered entity for 2011. Thus, if the methodology changes, the amount of the final fee for 2011 may vary from the preliminary fee calculation. The IRS will send the final fee calculation to each covered entity by August 15, 2011.

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.

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.

 

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.