Tax Strategy: The Continued Roll Out Of Obamacare
The Affordable Care Act was used as a source for tax interest since 2010. When it debuted, small business owners got health insurance from a tax credit. Last year, there was a roll-out for individual mandates and assistance credits.
Employee Mandate 2015
The biggest issue this year is the employee mandate. As a result, many businesses are now prepping for the Cadillac tax. Before the news reaches the press, the Supreme Court will probably make laws for federal exchanges. During the ruling, the constitutionality of the ACA will not be at risk.
Supreme Court Actions
The current issue that the Supreme Court must tackle involves health insurance subsidies. The major problem is the language for state exchanges. There are federal health exchanges in various states.
State and Federal Exchanges
There will be no changes if there are subsidies for federal and state exchanges. However, the ACA will become a law if there are only subsidies for state exchanges. The problem is that the price of insurance in most states will decrease participation. There are a few Republicans who are concerned about a backlash if subsidies are lost.
The individual mandate and the employer mandate was scheduled for 2014. However, the date was postponed by the administration. This year, the mandates will become effective. Some smaller businesses will not be subject to the changes until 2016.
The mandate is designed for businesses that have at least 50 full-time employees. Companies that have less than 100 employees will not be affected by the mandate until 2016. A full-time employee must work more than 30 hours a week. However, the government is trying to change the law to 40 hours a week.
The Employee Count Threshold
Any company that exceeds the employee count threshold will be penalized if essential coverage is not provided. Businesses that purchase single coverage must not exceed 9.5 percent of the yearly adjusted gross. Revenue Procedure 2014-37 has modified the percentage this year.
Minimum essential coverage is only available for businesses that offer health plans with key benefits. Nearly 95 percent of the staff should get coverage. The employee’s kids must receive coverage too.
Businesses that are penalized must pay over $2,000 each year. The government calculates new charges every month. This year, businesses that have 100 or more employees only pay 70 percent of the penalty.
Key ACA requirements were also delayed to 2015. Business owners must give Form 1094-C to the IRS and Form 1095 to every employee. Employers who require Form 1095-C have to calculate the cheapest plan for employees each month.
Employer reporting is an obligation, so managers must gather detailed information to process the forms. Businesses that have 50 to 99 workers will be not subject to the mandate until next year. However, these companies must comply with the 2015 reporting laws.
In 2018, there will be an excise tax for health plans that are sponsored by high-cost employers. The single coverage dollar limit will be $10,200. Family coverage will have a $27,500 limit.
There is a huge concern because insurance costs are pushing certain plans to their limits. The plans consist of strategies that benefit employees and owners and strategies that help businesses negotiate wage increases. Employers are now decreasing their health plan costs because of the excise tax.
Since Republicans in Congress are now in control, legislative proposals won’t stop. Besides the ACA, the most common proposal involves repealing the excise tax for the medical industry. This tax will repeal the Cadillac excise tax and will fund the ACA.
Without funding sources, the most important legislative proposals will not reach President Obama. This is why the 2016 election is crucial. The long-term prospects are depending on the election results.
According to Notice 2013-54, all employee reimbursement costs for insurance may not meet ACA requirements. The IRS stated that the same law applies for reimbursements that are processed before or after taxes. Businesses are not subject to a penalty if an increased compensation is not tied to health insurance costs.
Overall, the Affordable Care Act will produce more tax issues. As a result, this tax season will be quite challenging.
I’m a Tax Pro based in Georgia. I love to cover Tax and Accounting topics. I’m an entrepreneur, and I like men and women who desire to build businesses and help in the economy. I trust you appreciated my blog post. Please don’t hesitate to provide me comments.
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