— As more requirements of the health care law take effect, income tax filing season becomes more complex for small businesses.
Companies required to offer health insurance have new forms to complete providing details of their coverage. Owners whose payrolls have hovered around the threshold where insurance is mandatory need to be sure their coverage — if they offered it last year — was sufficient to avoid penalties.
Even the most tax-savvy owners may find that do-it-yourself doesn't work when it comes to fulfilling the law's requirements. Many don't know about the intricacies of the new health care regulations associated with the law that affect employers, says Lydia Glatz, an accountant with the firm MBAF in Fort Lauderdale, Florida.
Small business owners are “more involved in running their day-to-day business,” Glatz says.
Here are some of the issues related to the health care law that small businesses need to be aware of:
How many employees do you have?
Companies with 100 or more workers were required to offer affordable health insurance to employees and their dependents, but not their spouses, starting in 2015. Businesses with 50 to 99 workers must offer coverage starting this year; those with under 50 are exempt.
Owners who were on the hook for affordable insurance last year but didn't provide it may face thousands of dollars in penalties — $2,000 per employee per year, not counting the first 80 employees for the 2015 tax year, and the first 30 for 2016. So it's critical for them to know what their head count was — and many may not realize the calculations are based on a company's 2014 payroll, not 2015.
Here's where it gets complicated: Part-time workers and those fired during the course of the year can all be counted toward the threshold where coverage is required. So can some seasonal workers.
Part-timers work fewer than 30 hours a week under the health care law. They must be counted toward what are called full-time equivalent workers. If, for example, a company has two people who each work an average 15 hours a week, they count as one full-time equivalent employee working 30 hours. A company with 30 full-timers and 40 part-timers who average 15 hours a week each has 50 full-time equivalent workers and is required to offer insurance.
"The concept could potentially catapult what one believes to be a small business into a (large one)," Glatz says.
Another wrinkle: Owners with multiple companies that combined have 50 or more workers may be required to offer insurance, even if each of the individual companies has fewer than 50.
New tax forms
Starting this year, businesses required to comply with the health care law must complete forms that detail the cost of their coverage and the names and Social Security numbers of employees and their dependents. The government will use the information to determine whether a company provided coverage that was affordable under the law, or whether it must pay a penalty.
Accountants have described the forms as labor-intensive, because they require information from a number of sources including payroll and health insurance records. Many companies have had to hire workers or payroll services to complete the forms.
The IRS, recognizing the forms' complexity, has extended the deadlines for the forms to be filed. Forms 1095-B and 1095-C, which must be given to workers, are now due March 31. Forms 1094-B and 1094-C, required to be filed with the IRS, are due by May 31 if they're not being submitted on paper, and June 30 if filed online.
Well-intentioned, but illegal
Some employers with fewer than 50 workers and who don't offer insurance have tried to help staffers with the costs of coverage by giving them money toward their premiums, with the intention that the money will be tax-free. That could get owners into expensive trouble with the IRS — they can be fined $100 per day per employee receiving the money, a total of $36,500 per year for each worker.
The problem is that some employers treat this money as a health benefit, but it's not coverage that complies with the law. So they can be penalized.
Companies can help employees with their premium costs by giving them a raise or a more traditional bonus, says Mark Luscombe, a tax analyst with the business information company Wolters Kluwer. That means withholding income and what's known as payroll taxes — Social Security and Medicare — from employees' paychecks, and for companies to pay their payroll tax share.
Some of Megan Blair-Valero's clients in her bookkeeping company have given employees money for their premiums, wanting to help staffers out. When she finds out about it, she has to stop working for them rather than get her firm, Nantucket, Massachusetts-based Fogged In Bookkeeping, in trouble.
"We say, we can't be complicit in this," she says.