[IMGCAP(1)][IMGCAP(2)]Are your clients prepared for the latest round of Affordable Care Act (ACA) compliance deadlines? Many have referred to this as “pay or play”—clients will either comply with the ACA’s rules or they will pay significant penalties.
No matter what you believe, or what your clients may want to do, education and action are a must, but with adherence comes the burden of changing from manual to automated processes. Here’s what you need to know about the ACA; important deadlines and how you can help your corporate clients meet productivity challenges.
ACA Deadlines and Key Components
The deadlines and important parts of the ACA depend on the size of the company and the income of its employees. Employers with 50-99 employees will need to file form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) by Feb. 28, 2016, if filing on paper, or March 31, 2016, if filing electronically. These companies also must file form 1095-C (Employer-Provided Health Insurance Offer and Coverage), which must be issued from the employer to the employee by Jan. 31, 2016.
Effective January 1, 2016, businesses with more than 50 full-time employees must offer health insurance to their employees and dependent children. The ACA dictates than an employee must work an average of 30 hours per week to be considered full time. Businesses of this size must also meet minimum essential coverage (MEC) requirements: they must offer coverage to 95 percent of full-time employees. Under the MEC, self-only coverage is 9.5 percent or less of the employee’s income, and the plan covers at least 60 percent of plan costs.
If your clients have 50 to 99 employees, here is the potential financial impact:
- Starting in 2015 – If a business fails to provide employees with the mandated Form 1095-B/1095-C and/or fails to report correct information, the penalty is up to $500 per form.
- Starting in 2016 – If the business offers health insurance and does not satisfy the “affordability” or “minimum value requirements,” the company could be subject to an excise tax of up to $3,000 (minimum $250.00/month per employee) per year.
- Starting in 2016 – If the business did not make a qualifying offer of insurance to at least 95% of its full-time employees or equivalents, it could be subject to an excise tax of $2,000 per employee.
If you have clients with less than 50 employees – as most firms do – there is no reporting requirement. However, if your clients have a mix of full-time and part-time people, and may reach 50 employees or are planning to be there soon, you should meet with them to assess their situation.
In addition, if a company has less than 50 full-time employees and offers health insurance to its employees, the company may be eligible for a tax credit. To qualify, make sure your clients purchase coverage through the SHOP marketplace or healthcare.gov, and that the average annualized wages of employees does not exceed $51,000. In addition, the business must pay at least 50 percent of the total cost of the insurance premiums. If eligible, the business will file tax credit using Form 8941 as part of its business tax filing. If granted credit, the amount of the credit is 50 percent of premiums paid.
Transparency: Do the Right Thing!
If you or your firm work solely on tax preparation, turning a blind eye to the ACA requirements is not advisable; you cannot sit back and do nothing just because the topic is out of your wheelhouse. Instead, let your clients know about the filing requirements. You’ll be much more admired by your clients for speaking up, and who knows … maybe you’ll even get more referrals.
Most clients are already aware of having to cover employees under the ACA for health insurance, but many businesses do not realize they also have to meet the ACA’s tax filing requirements. Each business should work with its insurance and payroll provider now to begin to gather the necessary information to prepare Forms 1094-C and 1095-C.
Here is a list of all the information required to file both forms:
- List of all employees and their Social Security numbers, for which health insurance was offered.
- Social Security number or date of birth, if the employee’s spouses or dependents were covered if the employer is self-insured.
- The months each employee was offered insurance.
- The type of insurance offered, whether the insurance was offered to just the employee, the employee and their spouse, or the employee, spouse and dependents.
- The employee’s share of the lowest cost monthly premium for self-only minimum value coverage.
Advice for Clients Unwilling to Comply with ACA Deadlines
Back to the “pay or play” scenario, sometimes, no matter how hard you try, clients are going to be stubborn or hesitant to comply with ACA compliance. In this case, we recommend two approaches.
First, tell your clients why the forms are required to be filed: to help the IRS administer the healthcare tax credits and penalties given or assessed to individual taxpayers. Second, go over the consequences for non-payment. If employers do not comply with the reporting requirements, their employees could potentially file tax returns claiming the health insurance credit, and that could cost the government millions in unwarranted funds.
On top of that, there are harsh penalties if clients fail to comply. The penalty for not offering insurance for companies with more than 100 full-time employees is $2,000 per employee. Also, the penalty for not filing the information returns for forms 1094-C and 1095-C is $250 for each unfiled return.
Automating the Process
In our line of work, time is important, and that’s where automation comes in handy, saving you and your clients a lot of time.
Think about it. The IRS suggests it will take four hours to complete Form 1094-C and 12 minutes to complete each form 1095-C. So, if a company has 50 employees, the IRS suggests it would take 10 hours to complete the filings. This does not even account for gathering the information, so obviously, any automation available would be helpful.
Automation is huge for a firm because it helps clients get through this process, proving to them how valuable the firm is, while getting the firm through a necessary evil at the same time. Now is the time to evaluate ACA automation solutions from established software providers, and implementing the process and tools that will help your clients to meet ACA requirements.
Remember, the best role you can serve is advocacy. Speak up and do what you do best: serve as your clients’ trusted advisor.
Mark Stricker, CPA, is a tax partner with BIK & Co, LLP, in Palatine, Ill. Contact him at email@example.com. Marshal Kushniruk is executive vice president of global business development at Avalara. Contact him at firstname.lastname@example.org.
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