How The Affordable Care Act (ACA) Will Affect Your 2015 Taxes
If you are like one of the millions of business owners in the United States, you are probably wondering how the Affordable Care Act (ACA) will not only affect your large business, but specifically your 2015 tax return. While ObamaCare’s tax credits are helpful to many small businesses, 4% of large firms face new mandates. The changes in quality, affordability, and availability of health insurance due to ACA expansions come at a high cost – especially for large businesses.
Keeping It Affordable For Large Businesses
Tax breaks, tax credits and other incentives are offered via the Small Business Health Options Program (SHOP) to businesses with equal to or less than 25 full-time employees making less than $50,000 in average annual wages. These incentives specifically help to provide health benefits to employees of small businesses without paying additional taxes under the ACA.
There is, however, an increase to the current Medicare part A tax which affects businesses and employees making over $200,000 annually. In addition, businesses with 50 or more full-time employees are required to offer health insurance or pay a penalty.
However, keep in mind that only 0.2 percent of US businesses with more than 50 employees don’t already offer healthcare insurance to full-time employees. There are provisions in the ACA to help make health insurance affordable for large businesses. For one, starting in 2017, states will be let businesses with more than 100 employees purchase healthcare coverage in the shop exchanges.
Understanding the Penalties & Your Tax Returns
There are two possible scenarios for not providing healthcare coverage to your employees which may affect your 2015 tax return. A penalty for not providing any healthcare coverage and a penalty for not providing affordable healthcare coverage.
Businesses with more than 50 full-time employees who do not provide their employees with any healthcare is $2,000 per year for each full-time employee minus 30. For example, if your company has 60 employees and you do not provide any health insurance to them, the penalty formula would be as follows: The number of employees at your company minus 30 equals 30.
Then, multiply that 30 by $2,000 to equal $60,000. Therefore, your company of 60 employees would pay a penalty of $60,000 per year for not providing your employees with even basic healthcare. Just when you thought that was steep, know that the penalty increase each year according to growth associated with insurance premiums.
Large business owners will also pay a penalty if any employee has to pay more than 9.5 percent of their income to pay for their healthcare coverage. Because 9.5 percent is not considered in the “affordable” range, the company faces the penalty.
How Is Your Healthcare Deemed Affordable?
When looking at a company’s health insurance and determining what is affordable, the Affordable Care Act considers whether the employer pays a significant portion of their employees’ coverage. Under the Act, an employer must pay at least 60% of healthcare expenses to avoid penalization.
Despite forcing Large Companies into a higher tax bracket, the ACA could be a giant step towards a more prosperous America. Small Businesses and Entrepreneurs are the ones most positively affected by the change, allowing 83 percent of currently uninsured small businesses to become eligible for healthcare coverage.
Employees at both small and large companies can now get the health coverage they and their families need enabling a better life for all the employees who help to grow our business and make our success possible.
Are You ACA Compliant? Download Your Free ACA White Paper!
The Affordable Care Act can be confusing. Download your ACA white paper to understand the ACA, make sure your business is compliant, and avoid penalties.