Tag Archives: tax

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.

 

 

 

 

 

Filing Frenzy: Tax Deadline Strikes Today

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By: Jake Clabaugh, WIPP Government Relations

Tax Day is upon us and woman business owners have been working overtime. Not on growing their firms, planning investments or making important hiring decisions, but on tax compliance. At least, that’s according the House Small Business Committee, which took a look at the burdensome tax.

Forgetting tax liability – the amount a business owes – the Committee focused on how difficult it is for small businesses to satisfactorily comply with dense tax rules. According to the Small Business Administration (SBA), small businesses spend 5.5 billion hours preparing and filing taxes – time that should be spent growing the business. The costs and complexity of calculating tax provisions makes it difficult for smaller businesses to take advantage of incentives designed to reward investment. As a result, larger businesses that can incur the costs of calculation reap the rewards.

As we’ve heard from WIPP members across the country, tax certainty is a top priority. Clarity on what provisions and incentives will be enacted would provide businesses with the ability to plan ahead, rather than adjust to a changing environment. For the last few years, Congress has passed legislation solely for “tax extenders” – deductions and credits that were set to expire at the end of the previous year, but were extended to cover the current tax year. While many of these credits could provide some relief for small businesses, firms spent the entire year without knowing if these provisions would be available. Hardly an efficient way to have to run your business.

A simpler tax code would reduce compliance time and allow owners to focus on their business – not the latest tax rules. Also, small businesses should be able to take advantage of the same incentives that larger businesses can. WIPP will continue to focus our advocacy on the two guiding principles of simplicity and fairness for women-owned businesses.

Could comprehensive reform – not seen since the 1980’s – be on the horizon? House Ways and Means Committee Chair Kevin Brady (R-TX) announced last week that his Committee is planning to release a tax-reform “blueprint” this summer. Additionally, Members of the House and Senate have stirred over international tax reform in the wake of recent corporate mergers. While the conversations are ongoing, comprehensive tax reform in an election year, with an ardently divided Congress seems, at least in our view, unlikely.

For updates on tax policy and other finance issues, please visit WIPP’s Economy and Tax section and WIPP’s Economic Blueprint.

 

 

More Than Cheer In Congressional Stocking

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Women business owners enter the holiday season with a gift from Congress — more money for important women’s entrepreneurship programs.

Just when it seemed like Members of Congress would have to delay their Holiday break, the House and Senate passed two key bills to conclude the legislative year. After funding the government with stopgap measures for over two months, Congress agreed on a spending bill thru September 2016. Accompanying the yearlong spending bill is a bipartisan agreement to extend expiring tax rules for businesses and families. Both bills give women-owned businesses reason to celebrate during the Holiday season.

The $1.1 trillion funding bill sets spending levels for all government programs through September 30, 2016. Congress increased funding for many of the Small Business Administration’s (SBA) lending and entrepreneurial development programs. The chart below highlights WIPP’s priorities and the programs import to women entrepreneurs:

  FY2016 WIPP’s Request FY2015
Women’s Business Centers $17 million $16 million $15 million
National Women’s Business Council $1.5 million $1 million $1 million
Microloan Program Lending $35 million $35 million $25 million
Microloan Program Technical Assistance $25 million $25 million $22.3 million
PRIME Program $5 million $5 million $5 million
Office of Advocacy $9.1 million $9.1 million $8.45 million

WIPP advocated throughout 2015 on behalf of women-owned businesses and entrepreneurs and WIPP’s efforts culminated in full and increased funding levels for vital programs. Congress gave a huge boost to the microloan program- a primary capital access vehicle for women-owned businesses – by expanding lending authority by 40% to $35 million. Women’s business Centers (WBCs) will receive an increase of $2 million, which will enable the WBC program to provide additional grants for entrepreneurial development training for women entrepreneurs. Not only did WIPP advocate for increased funding for the WBC program, WIPP supported The Women’s Small Business Ownership Act of 2015. This bill would increase the WBC program’s authorization to $21.75 million, increase awards to Centers from $150,000 to $250,000, and provide modernizations to the program’s granting and approval process.

Congress’ tax “extenders” bill, an annual extension of certain tax credits and deductions, provides certainty for businesses and valuable incentives for research and investment. The Protecting Americans from Tax Hikes Act will expand and make permanent small business expensing rules and the Research and Development (R&D) Tax Credit. Lawmakers permanently extended the small business expensing limitation of $500,000 that was in effect from 2010 to 2014.  Had this rule not been extended, businesses would only have been allowed to deduct a maximum of $200,000 for machinery and equipment investments.

The bill also makes permanent the R&D credit, making it easier for start-ups and small businesses to receive tax deductions for innovative projects. According to WIPP’s 2015 Survey of Women Business Owners, tax burdens were the prime concern of women-owned firms. Specifically, women business owners cited uncertainty in tax credits and deductions as an annual concern. This bill helps alleviate some of the uncertainty.

As we wrap up 2015, Congress’s end of the year legislation provides full funding and certainty for programs important to women entrepreneurs.  We are looking forward to a productive and successful 2016.

House Committee Talks Taxes For Small Businesses

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BY: Jake Clabaugh, WIPP Government Relations

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If, like most small business owners, you have concerns about year-end tax planning, Congress may have a Holiday present for your business’ bottom line.

 

An agreement to reauthorize tax rules, known as “extenders,” could come before Congress adjourns for their Holiday recess. Extenders are temporary tax rules and require Congress to authorize their renewal. Extension of these provisions, although temporary, could save your business from significant tax liability.

 

For small businesses, these changes can have a tremendous impact. The House Small Business Committee held a hearing, “Employers of Choice: How the Tax Extender Debate Will Affect Small Business” on December 3 to discuss how the year-to-year renewal process impacts small firms. The hearing allowed members of the small business community to explain the importance of these tax rules and how uncertainty can negatively affect investments by small businesses.

 

Did your small business invest in any equipment this year? Then one tax extender that is important for your business is often referred to by its place in the tax code, Section 179, or simply as “Small Business Expensing.” This rule allows businesses to deduct the full cost of equipment purchased during the tax year, subject to certain conditions, instead of writing off portions of the purchased equipment over several years. If this provision is not extended, small businesses that made significant investments in equipment could face higher tax liability.

 

Last year, Congress agreed to reauthorize certain tax extenders for the 2014 tax year. For the 2015 tax year, negotiators in the House and Senate are still determining what tax rules to extend and for how long. A similar bargain is expected this year, but it is still unclear what provisions will be included.

 

For more information, please see WIPP’s advocacy efforts on the Economy and Tax.

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!