As the Affordable Care Act (ACA) has been phased in, there have been many changes for both individual taxpayers and their employers. The provisions have resulted in specific tax credits and potential penalties for both individual taxpayers and a variety of employers. There are specific criteria to meet under the act, so consulting your tax professional, such as L. James & Associates in Denver, CO. They will help you to determine if you have met the applicable criteria, based on your taxpayer status or the size of your business.
Premium Tax Credit
Starting in 2014, families and individuals could take a premium tax credit to assist them in paying for their health insurance. However, there are specific points to remember as outlined below:
Keep in mind, however, that if your income exceeds what you reported when applying for your insurance through the marketplace, you may have to refund some of the credit when filing your latest return. Therefore, it is important to work with your tax professional to determine if you owe the government a refund or owe a penalty.
Individual Taxpayer
Additionally, changes have been made to what can be reimbursed from the Flexible Spending Arrangement (FSA). While these funds can reimburse many medical out-of-pocket expenses, over-the-counter medicine can no longer be reimbursed without a prescription. However, most other health care expenses are still eligible for reimbursement. Using one of these accounts provided through your employer, it might be possible to carryover some funds to the new year.
ACA for the Employer
Here are three safe harbors that you need to be aware of as an employer. By complying with one or more of these harbors, then you are meeting what is defined as an employer’s shared responsibility.
It is important to remember that whatever safe harbor you choose to apply, must be consistent for your entire workforce. Providing more than one health insurance option also means that the affordability component only applies to the lowest cost choice.
Under the Affordable Care Act, companies and small businesses must determine their status. If your business has over 50 employees, it may be considered applicable large employers (ALE). Full-time is defined as 30 hours a week. Yet, this is not just full-time employees, but also includes part-time employees as well. For example, two part-time employees, who work 15 hours each week, would combine to count as one full-time employee.
If your company has the minimum of 50 employees but also must hire on a seasonal basis, then these additional workers will also factor into your employee total. Additionally, your 50 employees need to have worked for more than 120 days within the calendar year. For most companies, your ALE status will be determined by the number of qualifying employees your business employed during the previous year.
For those that qualify as ALE, then you must provide health insurance options to qualifying employees and any eligible dependents. These options must meet the minimum standard by the ACA’s definition. A penalty is possible if less than 95% of eligible employees are not offered coverage.
Finally, as both an individual and an employer, it is important to remember that you need to have the minimum coverage required by the act in terms of insurance. Potential tax liability can result if the coverage is not place for the entire year. Additionally, there may be tax penalties incurred for months where a taxpayer was uninsured during the course of the year. Employers need to remember the following rule regarding the health insurance being offered to those eligible employees, because your offering needs to provide coverage for at least 60% of the total cost of benefits for the services provided by the plan.
Click on the link below to contact one of the tax professionals at L. James & Associates in Denver, CO, to consult about your potential tax liabilities under the ACA.
