Benefits From Health Care
plenty of debate about whether the new health care reform bill
is good for America. Whatever your views, it looks like
the Affordable Care Act - a massive piece of legislation
passed by Congress in March - is here to stay.
The majority of Americans without health insurance are the
owners or employees of small businesses. For many of
these individuals, health insurance has been unaffordable for
themselves, their families, and their employees.
But the new legislation is set to change that. It makes it
less expensive to purchase insurance - and it provides tax
credits for small business owners who do.
And, because the aim of the bill is to get the vast majority
of Americans at least minimally covered, the Act imposes
tax penalties on those who don't purchase insurance.
If you own a small
business or are a sole proprietor, read on for an overview
of how the bill affects you.
What Do Small Businesses Get?
Cheaper Insurance through
Health Exchanges. The Affordable Care Act sets up
state-run Health Insurance Exchanges that allow individuals
and small business owners to get the same discounted insurance
rates larger corporations have been enjoying for years. This
makes coverage much more affordable for these folks.
Tax Credits. The Act comes with $40 billion in tax
credits for small businesses who offer health insurance
coverage to their employees. The federal government expects
that more than 60% of small employers - or 4 million firms -
will be eligible for these incentives. These are meant to
recover some of the companies' cost of offering coverage.
now, if your business employs 25 or fewer people who are
making $50,000/year or less on average, you get up to 35%
credit on health insurance premiums. The credit is based on a
sliding scale, with smaller companies that have lower-paid
workers receiving the largest credit. In 2014, if you buy that
insurance through a Health Care Exchange, the maximum credit
rises to 50% for 2 years. Tip: The tax credit cannot be
claimed by small business owners themselves or self-employed
individuals. However, those folks may be eligible for federal
subsidies. See the guidelines below.
What If You're
Individuals who work for
themselves can buy insurance on the health exchanges and also
receive more affordable rates. To help pay for the premiums,
people whose annual income is up to four times the poverty
level receive federal subsidies.
Note: To help pay for health care reform, taxpayers
in the highest tax bracket - those making $200,000
individually or $250,000 married - will see a rise in
their Medicare taxes. Medicare Part A taxes will rise by
.9%, and taxes on unearned income will increase by 3.8%.
These changes take effect January 1, 2013.
Mandate - Are You Affected?
Small businesses with 50 or
fewer employees are not required to provide insurance to
their employees under the new health care law. However, larger
companies with more than 50 full-time employees do need to
provide insurance, beginning in 2014, or face tax penalties of
$2,000 annually per worker above 30 workers.
Must Participate -
or Face a
If you don't
buy coverage, you're faced with a tax penalty to the
beginning in 2014.
This fine starts fairly small, but by 2016, when it's
fully phased in, it's more substantial. An
insurance-less person would have to pony up whichever is
greater: $695 for each uninsured family member, up to a
maximum of $2,085; or 2.5 percent of household income.
Attention for 4 Industries
Employers in three industries
- tanning salons, construction, and restaurants - see these
specific changes under health care reform:
Tanning Salons. In July
2010, a 10% sales tax was instituted on individuals using
tanning salons. The revenue raised by this measure is meant to
help pay for the costs of the Act.
Construction. In the
construction industry, a higher percentage of companies must
comply with the 2014 coverage mandate - those with just 5 or
Restaurants. Under the
mandated insurance provision that goes into effect in 2014,
two part-time workers equal one full-time worker.
Want to know more?
Give us a call at 301-657-8080
There's a lot more to the Affordable Care Act than we've
covered here - including the elimination of denial of
coverage for pre-existing conditions and free preventive
care. At a
whopping 2,600 pages,
this bill is complicated and far-reaching. If you have
any questions about how this bill affects your business
and your tax obligations, please let us know. We're here
As always you can call our offices if you have any
questions about these or any other accounting related issues, at 301-657-8080.
Regards, Paul Sullivan, CPA