Tag Archives: IRS

Keep It Simple, Silly

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By John Stanford, WIPP Government Relations

 

hc - wippIt’s a favorite phrase of my boss – and WIPP’s Chief Advocate – Ann Sullivan. The idea is nothing new: a simple solution is usually the best. That is why, for years, women business owners used the simplest possible idea for providing health benefits – you (employee) go out and get your own insurance and I (employer) will reimburse you. Simple, right?

They are called Healthcare Reimbursement Arrangements, or HRAs, and bringing them back (for the second time) is one of WIPP’s top healthcare priorities. We are making great progress. The House Ways and Means Committee approved legislation that would allow HRAs to be used for firms with fewer than 50 employees. The House as a whole is expected to vote on the bill next week.

The bill would allow employers to reimburse employees for qualified medical expenses like premiums and out-of-pocket costs. Importantly, employers must offer it to all eligible employees and cannot offer a separate group plan. The reimbursement is capped at around $5,000 for an individual and $10,000 for families and does not count as employee income (meaning no taxes!).

Again, the idea is simple. Employers select an amount to reimburse employees, instead of locking in an insurance plan that may not fit their employees or their budget. But why did we lose HRAs in the first place? That is not so simple.

The Affordable Care Act eliminated caps on health insurance plans—an undoubtedly good thing for when disaster or disease strikes. But, in the opinion of the IRS, these HRAs, by definition, had a cap (however much the employer contributed). So they were outlawed in 2013 or 2014.

2013 or 2014 is a strange way to describe when the IRS banned a certain healthcare plan. But that is what it was – the IRS notices on the issue were so confusing they had to issue additional regulations three times. Policy wonks, insurers, and healthcare consultants were unsure – let alone business owners – about whether they were allowed. And making a mistake on this carries severe penalties; offering a non-conforming plan can trigger a penalty of $100 per day per employee –more than $350,000 a year for a company with 10 employees.

Because of this confusion, WIPP stepped in asking Secretary Burwell to intervene on behalf of women business owners. She did and HRAs were allowed through June 2015. Legislation is needed to bring them back permanently and WIPP is optimistic Democrats and Republicans can work together, as they already have, to get this done. After all, ten million women business owners and their nearly nine million employees are pretty active voters.

It’s pretty simple.

More on how WIPP is working with Congress and the Administration to bring competitively-priced and accessible health options to women business owners is in our blog, Making the Affordable Care Act Work.

 

 

 

 

 

New IRS Resource helps Employers Understand the Health Care Law

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Healthcare taxThe new ACA Information Center for Applicable Large Employers page on IRS.gov features information and resources for employers of all sizes on how the health care law may affect them if they fit the definition of an applicable large employer (ALE).

Although the vast majority of employers will not be affected, you should determine if you are an applicable large employer.  If you averaged at least 50 full-time employees, including full-time equivalent employees, during 2014, you are most likely an ALE for 2015.  If you have fewer than 50 full-time employees, you may be considered an applicable large employer if you share a common ownership with other employers. As an applicable large employer, you should be taking steps now to prepare for the coming filing season.

The web page includes the following sections:

  • What’s Trending for ALEs,
  • How to Determine if You are an ALE,
  • Resources for Applicable Large Employers, and
  • Outreach Materials.

Visitors to the new page will find links to:

  • Detailed information about tax provisions including information reporting requirements for employers,
  • Questions and answers, and
  • Forms, instructions, publications, health care tax tips, flyers and videos.

In 2016, applicable large employers must file an annual information return – and provide a statement to each full-time employee – reporting whether they offered health insurance, and if so, what insurance they offered their employees. 

If you will file 250 or more information returns for 2015, you must file the returns electronically through the ACA Information Reports system.  You should review draft Publication 5165, Guide for Electronically Filing Affordable Care Act (ACA) Information Returns, now for information on the communication procedures, transmission formats, business rules and validation procedures for returns that you must transmit in 2016.

Visit the IRS’s new ACA Information Center for Applicable Large Employers resource page for more helpful information.

How PPACA Will Affect Your Business The Next 5 Years?

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Tod Covert  By Todd Covert, Executive Vice President of ACA Track

The Patient Protection and Affordable Care Act (PPACA) – also known as the Affordable Care Act or ACA – is the landmark health reform legislation passed by the 111th Congress and signed into law by President Barack Obama in March 2010. The legislation includes a long list of health-related provisions that began taking effect in 2010 and will “continue to be rolled out over the next four years.” Key provisions are intended to extend coverage to millions of uninsured Americans, to implement measures that will lower health care costs and improve system efficiency, and to eliminate industry practices that include rescission and denial of coverage due to pre-existing.

What does it mean for business today?

Business With 50-99 Employees 2015

Key Point #1

Navigating through transition relief to determine the date you need to make sure you are in compliance.

Applicable large employers (ALEs) with fewer than 100 full-time employees, including full-time equivalent employees, may have until 2016 to offer health insurance to eligible employees and their dependents without facing penalties.

This transition relief is available to employers who can certify that they have not reduced their workforce to remain under the threshold and have not materially reduced or eliminated health coverage previously offered. This certification needs to be included with your filing under Section 6056 for 2015.

The IRS will still grant transition relief to employers who reduced their workforce for “bona fide” business reasons.

Key Point #2

If you are over 50 FTE (Full-Time Equivalents) or part of a control group (Parent Company) with more than 50 FTE than you MUST file the 1095-C and 1094-C even if you do not offer coverage.

Key Point #3

Don’t “expect” your payroll company to complete these 1094-C and 1095-C forms.

Why?  Most payroll companies don’t even track the information required to complete these new IRS forms—It is more a benefit enrollment and plan design function than payroll.

  1. Dates of hire and waiting periods determine when employees are in the limited assessment period. Partial months are treated uniquely differently than full months and the series coded will change. Most payroll vendors only track deductions.
  1. Termination, rehire dates and class changes impact offer of coverage and safe harbor designations. Employees with a number of changes during the year can see a variety of different codes appearing on form 1095. Not a payroll function
  1. Offer of coverage determines whether 70% (2015) and 95% (2016) levels are reached or significant penalties are to be paid. Not a payroll function
  1. Safe harbor designations and income drive affordability calculations. Not a payroll function
  1. Transition relief provides the ability to mitigate risk and avoid penalties altogether.  Not a payroll function

Key Point #4

Start balancing culture and cost now because the “Cadillac Tax” is on the horizon in 2018—It’s not a matter of “IF” we hit the Cadillac Tax it’s a matter of “When” we hit the Cadillac Tax.

If health insurance exceeds $10,200 in premiums for an individual or $27,500 for a family. The tax amounts to 40 percent of the cost above that threshold AND its Non-Tax Deductible.

Why do we say “When” we hit the Cadillac Tax?  The insurance cost threshold ($10,200 in premiums for an individual or $27,500 for a family) only increases at CPI each year which is about 3.1% and Healthcare inflation increases close to 8.0% thus the X & Y axis lines are eventually going to cross.

Please join us September 29th for Women Accessing Capital: 5 Things You Need to Know About the New 1094-C and 1095-C IRS Reporting. Register now! 

More Taxes? No Taxes? How About Fair Taxes

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By John Stanford, WIPP Government Relations

WIPP recently submitted testimony to the House Small Business Committee on comprehensive tax reform. This blog gives an overview of WIPP’s advocacy efforts. For more details, I encourage you to read the testimony. Our government relations team strives to make official communications as easy-to-read as possible, but should you have questions please reach out to WIPP.   

 

Women entrepreneurs deserve a tax system that rewards the effort, tenacity, and risk it takes to start and grow a business. Moreover, they deserve a system of revenue collection (because that’s what taxes are) that is simple and fair.

In testimony submitted to the House Small Business Committee, WIPP said just that. Citing reports from the IRS National Taxpayer Advocate as well as the SBA Office of Advocacy, the testimony documents what women business owners already know: the tax system is broken, failing under the weight of complexity, uncertainty and outdated policies. But more importantly, the testimony addresses the impact of possible reforms – and the need for any overhaul to be comprehensive.

What does that mean? It means that the idea to lower the corporate tax rate, favored by the White House and some in Congress, must not happen independently of adjusting individual rates in a similar manner. This distinction matters because so many businesses, including almost 9 in 10 women-owned businesses, are structured as “pass-through” entities paying taxes as individuals (including S-Corps, Sole-proprietorships, partnerships, and LLCs).

Corporate-only reforms would be unfair to these businesses – and for that reason WIPP has always supported comprehensive (corporate + individual) reform. The testimony underscored this important point.

In addition, WIPP identified tax policies that, absent major reforms, would benefit women entrepreneurs. This includes making more small business tax credits and deductions permanent. In recent years, these tax “extenders” have been extended (hence their name) at the last minute, or even retroactively – not a good way for business owners to plan their budgets.

WIPP also asked Congress to consider tax credits that benefit new businesses, helping offset the costs of launching a new company. Another policy request was to avoid changing the Employee Stock Ownership Plan (ESOP) provisions in the tax code, as these have proven to be both popular and good tools to incentivize productivity and long-term business health.

In agreement with the idea that simple businesses (sales – costs = income) should have simple taxes, WIPP also supports simplifying the cash accounting method and expanding its optional use to more small businesses. Finally, with healthcare costs an always-growing burden on employers, WIPP continues its support of expanding the Small Business Health Care Tax Credit so more women entrepreneurs minimize the cost of providing healthcare to employees.

More ideas for reforming the tax system to incentivize entrepreneurship and innovation are out there. WIPP will continue working to identify policies that let women business owners focus more on their business and less on complex tax requirements. At the end of the day, all of these decisions should be made with the basic principles of simplicity and fairness in mind. And that’s exactly what we asked Congress to do.