Affordable Care Act – What To Expect This Tax Season

December 4, 2015

Tips for Navigating Affordable Care Act compliance this tax season.

The Affordable Care Act, known popularly as Obamacare, will be the focus of a lot of concerns for 2015 individual and business income tax return filing. We’d like to offer you the following information about the Affordable Care Act (ACA) and what that means when you file your 2015 Federal Income Tax Returns.

Please review the information below and contact us if you have further questions. We’re here to help you with ACA compliance.

AS AN EMPLOYEE:

What if I had no health coverage for 2015?
You will be subject to the Individual Shared Responsibility Payment. If you had no coverage for part of the year, you may be subject to a portion of the total payment. In most cases, the amount is based on a percentage of your household income. You may qualify for an exemption based on a number of factors, including hardship, annual premiums versus household income amounts, etc. You can find more information here: Individual Shared Responsibility Payment. Please let us know if you think you may qualify.

What forms will I receive and what do they mean?
You may receive Form 1095-A, which means you or a family member received health coverage through the Health Insurance Marketplace (in California this is Covered California). If so, you must complete Form 8962 and file with your annual income tax return in order to claim Premium Tax Credit.

You may also receive Form 1095-B, which means you had qualifying health insurance coverage during the taxable year. This would be issued by your health insurance carrier or by your employer (if your employer offers Self-Insured coverage). Reporting the information on this form will help you determine if you are exempt from the Individual Shared Responsibility Payment.

Additionally, you might receive Form 1095-C, which means your employer is an Applicable Large Employer and has offered health coverage to you and your spouse and dependents. Information on this form will help determine if you need to include Form 8962 with your 1040.

If you receive any or all of the above forms MAKE SURE you enclose them with your organizer or tax documents when you send them to us. Following guidelines for filling, in relation to the Affordable Care Act, is important in helping to avoid unnecessary penalties and payments.

AS AN EMPLOYER:

What is my reporting requirement?
Whether or not you are classified as an Applicable Large Employer (ALE) will affect your filing requirement. If you have 50 or more total full-time and full-time equivalent employees, you are considered to be an ALE. If your workforce was not constant in 2015, it will be necessary to go month-by-month and then calculate an annual average.

If your company is an ALE for 2015, then you are required to file Forms 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) and 1095-C (Employer-Provided Health Insurance Offer and Coverage Information Returns) by February 28, 2016. A copy of individual Forms 1095-C must be distributed to each employee by January 31, 2016.

How do I calculate Full-Time-Equivalent (FTE) employees?
For your employees who, on average, do not work at least 30 hours per week, you’ll combine their weekly hours and treat each 30-hour block as one (1) FTE employee. For example, if you have 2 employees who each work an average of 15 hours per week, you’ll count them, for ACA purposes, as 1 FTE. If you company had over 50 employees at any point during the year, it’s worth it to double-check if you meet the ALE criteria.

Will I owe money?
An ALE member may potentially owe one of two types of Employer Shared Responsibility Payments:

  1. If you, as an Applicable Large Employee, do not offer minimum essential coverage to at least 95% of your full-time employees, or if the plan you offer does not meet minimum essential coverage requirements -AND- at least one employee purchases health insurance through the Marketplace (e.g. Covered California) you may owe.
  2. If you do offer coverage as specified above, but at least one employee purchases health insurance through the Marketplace and received a Premium Tax Credit, you may be subject.

What if I’m a Small Business Employer?
If you have fewer than 50 full-time and FTE employees, you are not subject to filing or Employer Shared Responsibility Payment requirements, unless you provide self-insured health coverage (see below).

If you have fewer than 25 full-time and FTE employees, you may be eligible for the Small Business Health Care Tax Credit, depending on average employee salary and employer-covered portion of premiums. If you purchased insurance through SHOP (Small Business Health Options Program), let us know, and we can help you claim this credit.

What is Self-Insured Health Coverage?
Instead of paying a fixed premium for health insurance through a carrier, certain employers opt to cover employees’ health care benefits directly. Each out of pocket claim is handled as they are incurred. This type of plan is called is called a Self-Insured or Self-Funded Plan.

If this describes your company for 2015 (and you are not a qualified ALE), then you are required to file Forms 1094-B and 1095-B by February 28, 2016. Additionally, each of your employees must receive a Form 1095-B from you by January 31, 2016. Please let us know immediately, if this fits your situation, and we’ll be happy to guide you through.

What else should I know?
Failure to file and/or provide employees with the proper information returns for their 1040 reporting could result in potentially steep penalties.

Further information on any of the above can be found here: https://www.irs.gov/Affordable-Care-Act.

As always, please contact us for Affordable Care Act and any other tax, accounting, bookkeeping, or business management needs.

Wallace & Associates serves the greater Los Angeles area, including: Beverly Hills, Burbank, Calabasas, Culver City, Downtown LA, Encino, Granada Hills, Hollywood, Malibu, North Hollywood, San Fernando Valley, Santa Monica, Sherman Oaks, Studio City, Tarzana, Valley Village, West Los Angeles, Westchester.