LSL CPAs examines the impact of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act on business tax filings.
The Implications for the 2014 Tax Year
Effective January 1, 2015, employer health care coverage reporting requirements and employer penalty assessments began. As a result, the impact on 2014 is quite limited. With no reporting requirements for 2014, employers will not be assessed a shared responsibility payment if they fail to offer health coverage. In addition, small employers are still permitted a credit for providing health coverage.
What Is Applicable To A Large Employer In 2015?
An applicable large employer is defined by the statute as an employer with an average of at least 100 FTE’s in 2015 and at least 50 FTE’s in 2016 and thereafter. The determination of the number of employees is made based on the previous calendar year. An FTE is now defined as an employee who works on average at least 30 hours per week.
Beginning January 1, 2015, large employers who do not offer full-time employees affordable health insurance will be subject to a penalty. This penalty is known as a shared responsibility payment.
Did you know that businesses with common ownership may be aggregated and counted as one employer by the IRS for the purpose of determining whether related entities qualify as a large employer? If you own multiple businesses, it’s important to discuss this point with a tax professional. You have to find out how you qualify even if none of those businesses qualify as a large employer.
Employer Shared Responsibility Payment
The determination of whether a business owner will owe an Employer Shared Responsibility Payment is done through a series of steps:
- Is the taxpayer is an applicable large business owner?
- Did the business offer health coverage?
- Did at least one FTE enroll in a state exchange and receive an applicable premium tax credit or cost sharing reduction?
- If yes, your company will be assessed a monthly penalty of $2000 multiplied by the number of FTE’s.
- Did at least one FTE enroll in a qualified health plan (i.e. state exchange) and receive an applicable premium tax credit?
- If yes, your company will be assessed a monthly penalty of $3000 multiplied by the number of FTE’s who received a premium tax credit.
Although the applicable payment amount is higher for employers that offer health coverage (i.e. $3000 vs. $2000), the overall penalty will most likely be much lower for those employers. Such penalties can hurt the finances of a business. This is why you need to know more.
LSL CPAs do our best to ensure that our clients have no problems staying in IRS compliance while reducing their tax liability. To learn more about these new healthcare and IRS compliance issues, please contact the tax team at LSL CPAs by calling at (714) 569-1000.
By Jon Huckabay, CPA
