Here's a Quick
What You Need to Know About the
Affordable Care Act
you're self-employed or run a small business, here's a quick
look at what you need to know about the Affordable Care Act.
If you run an income-generating
business with no employees, then you're considered
self-employed. You can get coverage through the Healthcare
Marketplace and use it to find coverage that fits your needs.
Note: You are still considered
self-employed even if you hire independent contractors to do
work for you.
If you currently have individual
insurance--a plan you bought yourself and not the kind you get
through an employer--you may be able to change to a
Note: You can't be denied
coverage or charged more because you have a pre-existing
Businesses (50 or Fewer Employees)
If you have 50 or fewer
full-time equivalent (FTE) employees (generally, workers whose
income you report on a W-2 at the end of the year) you are
considered a small business under the health care law.
As a small business, you may get
insurance for yourself and your employees through the SHOP
(Small Business Health Options Programs) Marketplace. This
applies to non-profit organizations as well.
in 2016, the SHOP Marketplace will be open to employers with
100 or fewer FTEs.
As an employer, you must provide
notification to your employees of coverage options available
through the Marketplace and are required to provide this
notice to all current employees and to each new employee
regardless of plan enrollment status or full or part-time
employment. The Department of Labor has sample notices that
employers can use to comply with this regulation. One notice
is for employers who do not offer a health care plan and the
second for employers who offer a health care plan.
If you have fewer than 25
employees, you may qualify for the Small Business Tax Credit
(see next section). Non-profit organizations may be eligible
for the tax credit as well.
Business Health Care Tax Credit
Small businesses and tax-exempt
organization that employ 25 or fewer, full-time equivalent
workers with average incomes of $50,000 or less, and that pay
at least half (50 percent) of the premiums for employee health
insurance coverage are eligible for the Small Business Health
Care Tax Credit.
Starting in 2014, the tax credit
is worth up to 50 percent of your contribution toward
employees' premium costs (up to 3 percent for tax-exempt
employers). The tax credit is highest for companies with fewer
than 10 employees who are paid an average of $25,000 or less.
The smaller the business, the bigger the credit is.
For tax years 2010 through 2013,
the maximum credit was 35 percent for small business employers
and 25 percent for small tax-exempt employers such as
Businesses that have already
filed and later find that they qualified in 2013 or an earlier
year can still claim the credit by filing an amended return
for the affected years. A three-year statute of limitations
normally applies to these refund claims.
Note: The credit
is available only if you get coverage through the SHOP
Marketplace and is available to eligible employers for two
consecutive taxable years.
If you are a small business
employer who did not owe tax during the year, you can carry
the credit back or forward to other tax years. In addition,
because the amount of the health insurance premium payments is
more than the total credit, eligible small businesses can
still claim a business expense deduction for the premiums in
excess of the credit--in other words, both a credit and a
deduction for employee premium payments.
The credit is refundable for
small tax-exempt employers as well, so even if you have no
taxable income, you may be eligible to receive the credit as a
refund as long as it does not exceed your income tax
withholding and Medicare tax liability.
Tax on Businesses Not Offering Minimum Essential Coverage
Effective January 1, 2015 an
additional tax will be levied on businesses with 100 or more
full-time equivalent (FTE) employees that do not offer minimum
essential coverage. However, it will not apply until 2016 to
employers with at least 50 but fewer than 100 full-time
Employers subject to the
employer responsibility provisions in 2015 must offer coverage
to at least 70 percent of full-time employees as one of the
conditions for avoiding an assessable payment, rather than 95
percent which begins in 2016.
This penalty is sometimes
referred to as the Employer Shared Responsibility Payment.
You may have to pay this
additional tax if you have 50 or more full-time equivalent
employees and at least one of your full-time employees gets
lower costs on their monthly premiums through the Marketplace.
Employers with fewer than 50 FTE employees are considered
small businesses and are exempt from the additional tax.
The amount of the annual
Employer Shared Responsibility Payment is based partly on
whether you offer insurance.
If you don't offer insurance,
the annual payment is $2000 per full-time employee (excluding
the first 30 employees for business with 50-99 full time
employees and excluding the first 80 employees for those with
100 or more full time employees)
purposes of this calculation, a full-time employee does not
include a full-time equivalent.
If you do offer insurance, but
the insurance doesn't meet the minimum requirements, the
annual payment is the lesser of $3000 per full-time employee
who qualifies for premium savings in the Marketplace or $2,000
per full-time employee (minus 30 full-time employees).
employer contributions to employee premiums, the Employer
Shared Responsibility Payment is not tax deductible.
A health plan meets minimum
value if it covers at least 60 percent of the total allowed
costs of benefits provided under the plan. To determine
whether other coverage meets minimum value, please contact us
plans in the Marketplace meet minimum value, so any coverage
offered through the SHOP Marketplace should qualify.
on High Cost Employer-Sponsored Insurance
Effective in 2018, a 40 percent
excise tax indexed for inflation will be imposed on employers
with insurance plans where the annual premium exceeds $10,200
(individual) or $27,500 (family). For retirees age 55 and
older, the premium levels are higher, $11,850 for individuals
and $30,950 for families.
on Medical Devices
Effective January 1, 2014, a 2.3
percent tax will be levied on manufacturers and importers on
the sale of certain medical devices.
A 10 percent excise tax on
indoor tanning services went into effect on July 1, 2010. The
tax doesn't apply to phototherapy services performed by a
licensed medical professional on his or her premises. There's
also an exception for certain physical fitness facilities that
offer tanning as an incidental service to members without a
separately identifiable fee.
Don't hesitate to call us at (301) 657-8080 if you need
assistance navigating the complexities of the Affordable Care
Act. We're here for you!
Financial Services at Sullivan & Company, CPAs
Sullivan leads our Financial Services Division and is here to
help you navigate your financial future. As an Investment
Advisor Representative, he is able to provide an
independent opinion on the investments you already own or
are considering buying.
We can structure a portfolio
based on your risk tolerance or we can help you decide how
to invest in your company 401(k) plan. We work with each
client to identify their concerns and to provide solutions
according to their situation.
is also experienced in company retirement plans. If you own
a business that does not have a plan; we can discuss your
options and set up a plan that fits your company.
If your business already has a
plan; we offer a free evaluation of the plan to ensure that
it is up to date and working well for you and your
Our goal is to provide personal, unbiased and independent
advice to help you make well-informed decisions about your
financial life and investments.
Contact Paul Sullivan or Jordana Para to set up a free initial
consultation (301) 657-8080.
And as always if you have any questions about accounting or
investments and how they effect you or your business, please give
us a call. We
can help guide you in the right direction.
Remember you can call our offices if you have any
questions about these or any other accounting, tax,
financial planning or insurance related issues, at
Regards, Paul Sullivan, CPA
President, Sullivan & Company