IRS Health Care

Boston Business Tax Attorney:  The Affordable Care Act

The Affordable Care Act (ACA) aims to achieve a sweeping transformation of the nation’s healthcare system by providing affordable, quality health care for all Americans.  The ACA is long and complex and many updates and changes to the requirements have been imposed upon businesses and individuals under the Act.   

Given that the ACA is still subject to ongoing modification, many employers and individuals in the Boston area and across the United States are uncertain as to what is required under the new law.  While the Act is not a tax bill, it does contain important tax provisions administered by the IRS that are applicable to large employers, small employers and individuals.  Considering the expansive scope of the Act and the many new obligations and responsibilities set forth, employers and individuals should consult an experienced Boston business tax attorney to determine how to best plan for and comply with the ACA’s legal requirements.

Tax Provisions for Large Employers

Many of the requirements and responsibilities set forth in the ACA apply to large employers.  The ACA defines “large employers” to include employers with 50 or more full-time equivalent employees.  Beginning January 1, 2015, large employers will be subject to the Employer Shared Responsibility provisions added to the Internal Revenue Code by the ACA.  

Under these provisions, certain large employers will be required to offer “affordable health care coverage that provides a minimum level of coverage” to full-time employees (individuals employed on average for at least 30 hours per week) and their dependents.   Companies who fail to offer such health benefits may be subject to a tax penalty called the “Employer Shared Responsibility payment” in the event that one or more of their full-time employees purchases individual health care coverage from the health insurance marketplace and receives a premium tax credit for purchasing such coverage.   

The government will generally calculate the penalty amount by multiplying $2,000 times the employer’s number of full-time employees less the first 30 full-time employees.

In addition to the minimum coverage responsibilities, beginning in 2015, large employers must also file an annual return with the IRS disclosing whether they offer health care insurance to their employees and the type of insurance offered.  The ACA also requires that large employers withhold an “additional Medicare tax” (0.9 percent rate) on wages and compensation in excess of $200,000 dollars.  Additionally, large employers are required to report the cost of the health care coverage they provide to employees under an employer-sponsored group health plan on each employee’s W-2 form.

Tax Provisions for Small Employers

While businesses with 50 or fewer employees are not subject to all of the ACA’s requirements, the Act does contain a number of provisions applicable to small employers.  Under the ACA, employers with 50 or fewer full-time equivalent employees are eligible to purchase insurance through the Small Business Health Options Program (SHOP) marketplace.   

Similar to large employers, under certain circumstances small employers must withhold the additional medicare tax (0.9 percent rate) added by the ACA on wages and compensation above $200,000 dollars.  Small employers may also be required to report the cost of the health care coverage they provide to employees under an employer-sponsored group health plan on each employee’s W-2 form.  

The ACA does offer a small business health care tax credit to certain small employers who pay for the cost of premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace and meet other specific requirements under the Act.  

Tax Provisions for Individuals

Beginning in 2014, most individuals will be required to acquire “minimum essential” health care coverage.  Individuals who do not fall under one of the ACA’s exemptions and fail to obtain such coverage will be required to make a “shared responsibly payment” when they file their 2014 federal income tax return in 2015.  

For 2014, the IRS provides that the amount of this tax penalty is the greater of “one percent of your household income that is above the tax return filing threshold for your filing status” or a flat family amount up to a maximum of $285 dollars.  These tax penalties will increase over the first three years of implementation.  In addition to imposing tax penalties upon individuals, the ACA also offers premium tax credits to individuals falling within certain income limits who elect to obtain their health care coverage through the health insurance marketplace.  

A Boston Business Tax Attorney Can Help You Navigate the ACA

The legal team at Thorn Law Group has extensive experience helping businesses and individuals navigate complex IRS tax laws and regulations.  We actively monitor important developments under the ACA so that we can assist our business clients in developing employee benefit programs that best comply with the ACA’s legal requirements.   

Our attorneys also make certain that our clients are fully aware of changes in the law so that they can evaluate and develop personal tax planning strategies in accordance with the ACA.  The legal professionals at our firm have an extensive understanding of how the IRS enforces the tax laws. As former IRS attorneys we are well positioned to represent clients who may be subject to tax penalties and legal proceedings under the ACA.  

If you have questions about requirements under the ACA or would like to discuss your tax situation with an experienced Boston business tax attorney, contact our law offices today.  Kevin E. Thorn offers confidential consultations and can be reached at (617) 692-2989.