Understanding the Affordable Health Care Act and the changes for Small Business Owners and Employers!
Compliance for small business owners and employers with respect to Health Care Insurance and Employer Shared Responsibility Payment will start to go into effect in 2014. The Affordable Health Care Act (ACT or Obama Care) does not require small business owners or employers to provide health insurance, but if they provide health insurance, then they must comply with its requirements to provide affordable minimum value health insurance. Small business owners and employers that have 25 or fewer employees will also benefit from a hire tax credit for providing health insurance to their employees.
In 2014, the Act allows small business owners and employers to deduct up to 50% of their total cost of health insurance premiums for all employees to be credited back to them. This can be issued as a refund or a credit on taxes owed or carried forward. The 2013 monthly employee payroll count is used to determine, if, there are 25 or less full time employees on the small business owners or employer’s payroll on an average monthly basis.
Moreover, the average salary of the 25 full time employees must be less than $50,000 per year. Otherwise, the small business owner or employer will not be able to qualify for the tax credit. If you qualify, then as small business owner or employer you are able to deduct the health insurance payments as business expenses from your business’ taxable income and receive a credit on top of those deductions.
However, Small Business Owners or Employers are required to provide affordable coverage. Affordable coverage means that the employee’s annual health insurance costs do not exceed 9.5% of the household’s annual income. Since, only the IRS will be able to review this figure, the employer is provided a safe harbor if they make sure that the annual health insurance costs of the employee do not exceed 9.5% of the W-2 wages reported for the employee in box 1.
There are many other changes that small and large employers and individuals should be aware of and you can learn more at the Seminar we are providing on June 29, 2013 at the Asian American Business Expo. Please sign up on our Classes taught by Vihar Patel page or go directly to the www.asianamericanbusinessexpo.com. At a minimum you should speak with your corporate or employment law attorney, your professional employment organization or PEO, your health insurance administrator or broker, and/or your accountant to make sure you are prepared for the changes.
Of course, if you have any concerns or questions, then please contact us.