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Health care: 2015 large employer reporting requirements

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 at the Small Business and Self-Employed Tax Center. ■

©2015 CPAmerica International


It was announced on Friday, February 20, 2015 that approximately 800,000 people received incorrect 1095-A forms. The 1095-A forms are used to report the premiums and tax credits for taxpayers who signed up for discounted health insurance coverage through the HealthCare.Gov Marketplace. This error affects up to 20% of the statements sent by the federal insurance website. The error was due to a coding issue in a calculation that included the local premium data for 2015, instead of the information for 2014.

The government is notifying those who received an incorrect statement. If your form is incorrect, you should get a call and an email from the Marketplace. There will also be a message in your Marketplace account on When your corrected form is ready, you will be notified. The corrected forms are supposed to be issued in early March. If you received an incorrect 1095-A, you should wait to file your tax return until you receive the corrected form. If you already filed your taxes with the incorrect information you will need to amend you return.

Along with the announcement of the error, came an extension period to sign up for health insurance through the Marketplace. The original enrollment period began November 15th and ended February 15th. The extension will allow enrollment starting March 15th to buy coverage if they attest that they learned of the penalty of not having insurance when they filed their 2014 tax return. The additional enrollment period will go until the end of April. These individuals will still have to pay a penalty for being uninsured in 2014, and a partial penalty for the time they were uninsured in 2015, but they would avoid the penalty of being uncovered for all of 2015.



There was a major change to the threshold percentage regarding the medical expense deduction in 2013.

Starting in tax year 2013, your medical expenses now must exceed 10 percent of your adjusted gross income (AGI) for you to receive any tax benefit from those expenses. The rate prior to the change in 2013 was 7.5 percent.

The old rule of 7.5 percent still applies if the taxpayer or his spouse attains age 65 by the end of the tax year in question. Older taxpayers will receive the preferred 7.5 percent rate until 2016.

So, for tax year 2014, if one spouse of a married couple is at least 65, the couple still is subject to the former rate of 7.5 percent.

The types of medical expenses that are allowed to be deducted are the same as they were in the past. Expenses for the diagnosis and treatment of physical disorders, travel and lodging costs related to such expenses, qualified long-term care expenses and medical insurance premiums are still deductible. The limit on lodging costs of $50 per day, per individual, is the same.

The general rule is that medical expenses are deductible in the year paid. Deductible medical expenses must be substantiated. It is always a good idea to keep a copy of all medical invoices and receipts.

Your local pharmacy can give you a printout of all of your prescription activity for the entire year. This is a nice, convenient summary instead of having a bunch of individual receipts that you accumulated during the year.

The invoices, receipts and prescription summary serve as your backup. Just a canceled check without any documentation supporting it would not be considered adequate substantiation by the IRS. The IRS can disallow any unsubstantiated deduction.

The amount that you pay in medical expenses during the year is reduced by any reimbursements that you receive from your insurance company. If the insurance company covered the whole cost of a procedure, you do not have an eligible medical expense deduction. Only out-of-pocket expenses paid by the taxpayer qualify.

The medical expense deduction is not limited to qualified expenses of the taxpayer but includes the taxpayer’s spouse and dependents. The cost of providing medical insurance coverage for your family, such as employee co-pays (if your employer provides you with medical insurance coverage), is an example. And qualified out-of-pocket expenses for the spouse and dependents qualify as well.

As an example, if you have an AGI of $50,000 and are under the age of 65, you will need more than $5,000 in qualified medical expense deductions to receive any tax benefit. If you have $7,000 of qualified medical expenses, $2,000 will qualify as a potential itemized deduction. If you do not itemize on your return, you receive no benefit from these expenses.

With insurance costs rising, companies increasing the size of employee co-pays, insurance companies limiting various types of coverage and many people out of work, it becomes more important to keep accurate records of your medical expenses to see whether you qualify for this type of itemized deduction despite the threshold being increased from 7.5 percent to 10 percent.

©2014 CPAmerica International



Are you 65 or older, have Medicare, and other insurance coverage such as a group health plan from an employer? Who is the “primary payer” responsible for paying your medical bills first?

When there’s more than one payer, “coordination of benefits” rules decide who pays first. The “primary payer” pays what it owes on your bills first, and then your provider send the rest to the “secondary payer” to pay. There may be a “third payer” in some cases.

Who the “primary payer” is depends on a number of things including the number of employees in the company that is providing the group health care coverage. Generally, your group health plan pay first if you’re 65 or older, covered by a group health plan through a current employer and the employer has 20 or more employees. Your health care provider should bill Medicare if the group health plan did not pay all of your bill. Medicare generally will pay first if your employer has less than 20 employees.

Medicare becomes your “primary payer” after you retire at 65 or older.

There are various situations and type(s) of coverage that determines who the “primary payer” will be. Situations and coverage include disability, COBRA coverage, medical expenses from an accident, workers’ compensation coverage or Veterans’ coverage.

Medicare has a 32 page booklet entitled “Medicare and Other Health Benefits: Your Guide to who Pays First” that’s available at or by calling 1-800-MEDICARE (1-800-633-4227) to get the most current information. TTY users should call 1-877-486-2048.



The IRS has modified the “use-it-or-lose-it” rule for health flexible spending arrangements.

At the plan sponsor’s option, employees participating in a health flexible spending arrangement (health FSA) may be allowed to carry over to the next plan year up to $500 of unused amounts remaining at year-end, according to Notice 2013-71 and an accompanying fact sheet. Prior to this announcement, any amounts that were not used by year-end were forfeited.

Health FSAs are benefit plans established by employers to reimburse employees for healthcare expenses, such as deductibles and co-payments. These plans are usually funded by employees through salary reduction agreements, although employers may contribute as well. Qualifying contributions to, and withdrawals from, health FSAs are not subject to tax.

Unused health FSA contributions left over at the end of a plan year have historically been forfeited to the employer. A plan can, but is not required to, provide an optional grace period immediately following the end of each plan year. The grace period would extend the period for incurring expenses for qualified benefits to the 15th day of the third month after the end of the plan year (March 15 for a calendar-year plan).

For a health FSA to be a qualified benefit under a cafeteria plan, the maximum amount available for reimbursement of incurred medical expenses of an employee, the employee’s dependents and any other eligible beneficiaries with respect to the employee cannot exceed $2,500 per year. This maximum is effective for tax years beginning after Dec. 31, 2012.

The new notice provides that an employer, at its option, can amend its cafeteria plan document to provide for the carryover to the immediately following plan year of up to $500 of any amount in a health FSA remaining unused as of the end of the plan year. The notice also clarifies that the carryover does not count against or otherwise affect the next year’s salary reduction limit. Any unused amount in excess of $500 will be forfeited.

The notice provides that the plan sponsor can specify a lower amount as the permissible maximum carryover amount or can decide not to allow any carryover at all.

For a cafeteria plan offering a health FSA to adopt this new carryover provision, the plan must be amended on or before the last day of the plan year from which amounts may be carried over. The new provision may be effective retroactively to the first day of that plan year.

However, a plan may be amended to adopt the carryover provision for a plan year that begins in 2013 at any time on or before the last day of the plan year that begins in 2014. As a result, some plans may be able to put the carryover option into effect for 2013.

©2013 CPAmerica International

Healthcare notices must be sent by Oct.1

By Oct. 1, 2013, any business with at least one employee and $500,000 in annual revenue must notify all employees by letter about the Affordable Care Act’s healthcare exchanges, which will open Jan. 1, 2014.

The requirement applies to any business regulated under the Fair Labor Standards Act. Going forward, letters must be distributed to any new hires within 14 days of their starting date.

The notice requirement applies to all employers, whether or not they offer health coverage. In addition, employers must send the notice to all full-time and part-time employees, whether or not they are eligible for benefits.

Earlier this summer, the employer mandate, which states that every business with at least 50 or more full-time employees must offer workers acceptable coverage or face a $2,000 penalty per worker, per year, was pushed back until 2015.

But the Oct. 1, 2013, employee-notification deadline remains in effect.

Sample notices are available on the Department of Labor website at: (for employers that offer a health plan to some or all employees) (for employers that do not offer a health plan)

©2013 CPAmerica International


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.





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