Under the Affordable Care Act, large employers are required to file information returns with the IRS and provide statements to full-time employees.

You are a large employer if you employed, on average, 50 full-time equivalent employees or more during 2014. You must include employees of other members of any companies under common control.

A full-time employee is someone who works an average of 120 hours per month for purposes of determining large employer status.

If you are a large employer, you need to track the following information in 2015 so you can meet the reporting requirements of early 2016:

1. Whether you offered full-time employees and their dependents minimum essential coverage that meets the minimum value requirements and is affordable.

2. Whether your employees enrolled in the self-insured minimum essential coverage you offered.

It’s necessary to track the above information so you can meet the following reporting requirements mandated by the Affordable Care Act:

1. Form 1095-C, Employer-Provided Health Insurance Offer and Coverage – Large employers are required to provide this form to all of their full-time employees by Jan. 31, 2016. This form contains basic information about both the employee and the employer. It also provides information about the insurance coverage offered the employee during 2015 and the employee’s share of the premium cost.
2. Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns and Form 1095-C. Large employers are required to submit a copy of all of the Forms 1095-C issued to all of their full-time employees along with Forms 1094-C. The Form 1094-C is a type of summary sheet for the individual Form 1095-C. The 1094-C also requires some additional information disclosures regarding total number of employees, the full-time employee count and various eligibility information. These forms need to be submitted to the IRS by Feb. 29, 2016, or March 31, 2016, if filed electronically.

To be able to fill out the Forms 1095-C and 1094-C in a timely and efficient manner, large employers need to start tracking their full-time employee and insurance information for 2015 now. ■

©2015 CPAmerica International

When starting a new business, a wise first step is to seek the advice of your CPA.

Some things you might want to consider before starting the business:

1. Business Structure – Determining the business structure should be the first decision that you make. The basic choices are sole proprietorship, corporation, limited liability company or partnership. There are two different types of corporations: C corporation and S corporation. A limited liability company defaults to being taxed as a partnership – or a sole proprietorship in the case of a single member LLC – but may elect to be taxed as either a C or an S Corporation. The type of entity you select determines what forms you will need to file with the IRS and when you will need to file them.
2. Business Taxes – The four basic types of business taxes are payroll, income, self-employment and excise. The business structure you choose affects which taxes you will be subject to. The income tax could be either corporate income tax or individual income tax – again depending on the business structure.
3. Employer Identification Number –You are required to have an employer identification  number if you have payroll or if you choose the corporate or partnership form of business structure. Apply for your EIN through the IRS.
4. Accounting Method – An accounting method is a set of rules that you use to determine when to report income and expenses. The three methods available are cash, accrual and hybrid. Most taxpayers will choose the cash-basis method of accounting unless they are required to select another method. You are required to use the accrual method when your average gross receipts exceed $5 million computed over a three-year period of time.
5. Employee Health Care – The Small Business Health Care Tax Credit is available to businesses that employ fewer than 25 employees who work full-time, or a combination of full-time and part-time, and purchase insurance through the Exchange. The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities. The employer shared responsibility provisions of the Affordable Care Act affect employers employing at least 50 full-time equivalent employees.

Learn the tax basics of starting a business on IRS.gov at the Small Business and Self-Employed Tax Center. ■

©2015 CPAmerica International

Employers should already be preparing to comply with next year’s Affordable Care Act reporting requirements regarding their employee healthcare benefits.

Self-insuring employers and employers with 50 or more full-time employees are required under the Affordable Care Act to file information with the IRS about health insurance coverage provided – or not provided – to their employees.

The required reporting with respect to calendar year 2015 begins with providing an information return to the IRS by Feb. 29, 2016, or March 31, 2016, if reporting electronically. (Normally, the deadline is Feb. 28 each year, but 2016 is a leap year.) But employers should have already begun pulling together the 2015 health coverage information for each month.

Self-insuring employers – Code Section 6055

Self-insuring employers must file an information return with the IRS using Form 1095-B, Health Coverage, and Form 1094-B, Transmittal of Health Coverage Information Returns, each year, providing information about minimum essential coverage for each individual receiving the coverage. The forms must be filed by Feb. 28, or March 31 if reporting electronically.

Minimum coverage is defined as a healthcare plan designed to pay at least 60 percent of the total cost of medical services for a standard population. Most employer-sponsored health coverage qualifies as “minimum essential coverage.”

However, specialized coverage, such as vision and dental care, workers’ compensation, disability policies and coverage for only specific health issues, does not qualify.

The required information return must contain the following:

➜ Name, address and taxpayer identification number of the primary insured, as well as the name and taxpayer identification number of any family members of the primary insured who are also covered under this policy.

➜ Dates during which individuals were covered under minimum essential coverage during the year.

➜ Whether the health insurance is a qualified health plan in the small group market offered through an exchange. In a situation where employers are providing minimum essential health insurance coverage during the year, they must provide information regarding whether the coverage is a qualified health plan offered through a healthcare exchange and how much the amount of the advance payment is, if any.

➜ Any additional information the IRS requires.

If the minimum essential coverage is provided by the employer through a traditional group health plan, a return is still required to be filed by the deadline.

The return must contain the following information:

➜ Name, address, and employer identification number of the employer maintaining the plan

➜ Portion of the premium, if any, required to be paid by the employer

➜ Any other information the IRS requires

Employers providing health insurance coverage are also required to furnish related information about the coverage to each individual. For calendar year 2015, the information is due to individuals by Jan. 31, 2016.

These statements must provide the following information:

➜ The name and address of the employer maintaining the plan, and a contact name and phone number that the employees can access if they have any questions

➜ The information required to be reported on the return with respect to such individual

Large employers – Code Section 6056

Large employers, those with 50 or more full-time or full-time equivalent employees, must file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, and Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return, with the IRS by Feb. 29, 2016, or March 31 if reporting electronically. This information return reports the terms and conditions of the healthcare coverage they provided to their employees for the calendar year.

The employers must also provide related information to their employees by Jan. 31, 2016.

The information return must include the following:

➜ Employer’s name and identification number

➜ Certification of whether the employer offers full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan

➜ Number of full-time employees for each month of the calendar year

➜ Name, address and taxpayer identification number of each full-time employee employed by the employer during the calendar year and any months during which the employee and any dependents were covered under the eligible employer-sponsored plan during the calendar year

➜ Any other information the IRS requires

Large employers that offer employees the opportunity to enroll in minimum essential coverage are required to report:

➜ Duration of any waiting period for the coverage

➜ Months during the calendar year when coverage was available

➜ Monthly premium for the option that cost the lowest amount in each enrollment category

➜ Employer’s share of the total allowed costs of benefits under the plan

©2015 CPAmerica International

Whether you were for or against health care reform, there is no denying that the recently implemented Affordable Care Act (ACA or “Obamacare”) is something that will affect you during the coming tax season.

Even if you have been insured during the entire year, the IRS will require that you provide proof of insurance during your tax preparation in the coming year. This will increase the burden on tax preparers to retrieve documentation from the taxpayer in order to file your 2014 tax return. Be prepared upon filing that in order to complete any personal tax return, your accountant will require proof of health insurance coverage.

If you did not have insurance for the year, or had insurance for only a portion of the year, you may be subject to a tax penalty based upon your household income. The penalty for 2014 is the greater of $95.00 per adult ($47.50 per child), or 1% of your household income that is above the tax return filing status threshold for your filing status. This amount is prorated for the months that you were covered by the minimum health insurance coverage.

The vast majority of taxpayers will fall into the 1% penalty, which will be significantly larger than the $95.00 penalty that most individuals assume they will be hit with. The penalty continues to increase in 2015 and 2016 to “encourage” the un-insured to pursue health insurance from the marketplace or other provider. The penalty is capped at $3,600 per adult and $1,900 per child for 2014, and continually increases over the next two years. A family of four could be hit with a penalty as much as $11,000.00 for 2014!(Equivalent to the bronze plan premium for insurance coverage).

In order to avoid exorbitant tax penalties in the future, it is important to know when the enrollment periods are open to obtain health insurance. A recent poll indicated that 89% of registered voters were unaware of the open enrollment periods for the Marketplace. Here are the dates that you need to be aware of:

2015 Open Enrollment start November 15, 2014

2015 Open Enrollment Ends February 15, 2015

In future years the enrollment period will shift from October 31 to December 7. So make sure you are aware of the open enrollment periods and obtain health insurance to avoid this costly tax penalty.

On Monday, February 10, the IRS announced that it is delaying the shared-responsibility requirement under Sec. 4980H of the Affordable Care Act (also known as Obamacare) for employers who have 50 to 99 full-time equivalent employees in 2014. These employers will now have until 2016 to offer health care coverage to their employees.  However, these employers will still be required to report on their workers and health care coverage in 2015. The penalty had already been postponed last summer (its original effective date was 2014).

To be eligible for the delay, employers must not reduce their workforce or hours of service in order to qualify and they must maintain their previously offered health coverage.  This change was part of final regulations issued Monday by the IRS that also made a number of improvements in response to the proposed regulations issued back in 2012.

For instance, the final regulations ensure that volunteers such as firefighters and emergency responders do not count as full-time employees.  Also, for employers with 100 or more full-time equivalent employees, the regulations phase in the percentage of full-time workers to whom such employers need to offer minimum essential coverage.  The percentage is 70% in 2015 and 95% in 2016 and beyond.  Employers with 100 or more full-time equivalent employees that do not meet these percentages will be required make an employer shared-responsibility payment for 2015. The final regulations also contain transition guidance for noncalendar-year plans. There was no change for small businesses with fewer than 40 employees, which is about 96% of all employers; they are still not required to provide coverage or fill out any forms under the Affordable Care Act.

Many large companies are determining how they will handle the changes coming in January 2014 with the Affordable Care Act. For a company who employs 50 or more full-time employees that is already offering health care benefits, one option that I am reading about over and over is:

Employers would terminate their current health insurance plan; pay the penalty for each employee, (approx $2,000); and force employees to shop in the state and federal exchanges. While this may seem cheaper, companies need to consider that they will lose their tax deduction for providing health insurance benefits not to mention the consequences on employee morale and recruiting efforts.

Another option that has emerged is to continue to offer health insurance but through a Corporate Exchange instead. According to the Wall Street Journal, both Sears Roebuck and Darden Restaurants (which operates Olive Garden, Red Lobster and other dining establishments) announced in October they had signed on to Aon Hewitt’s Corporate Exchange. Sears has approximately 90,000 employees while Darden has about 45,000 that will be participating in the exchange. Through the Corporate Exchange, not only can an employee pick different insurance coverage, but they can pick different insurance providers. These options are similar to the ones that will be available under the public exchanges, but large companies with more than 100 employees are not eligible to participate in the public exchanges at least until 2017.

Under this option, there is no penalty as the group health plan is still fully compliant with the Affordable Care Act. The employer then decides how much of a subsidy to provide employees to purchase coverage. Ideally, this subsidy provided to employees would be evaluated annually to keep up with the potential increase in cost of coverage. The employee then takes their subsidy and can evaluate various provider options and levels within the exchange and pick the best plan for them. The more exchange participants, the greater the economies of scale. This type of exchange will supposedly keep costs for the employers lower because insurers are forced to compete with one another to attract members in the exchange to their plan. Besides the potential cost savings for the employer, employees are happier under exchanges because they can pick the type and level of insurance that they want. A single person in their 20’s can choose a relatively less expensive plan while someone in their 50’s can opt for more coverage.

This is a novel concept that if it works as Aon plans, will sure to be replicated and remain a viable option for employers.