ACA, Health Insurance, and Taxes--A Full-Plate Discussion for Small Businesses
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Transcript of ACA, Health Insurance, and Taxes--A Full-Plate Discussion for Small Businesses
![Page 1: ACA, Health Insurance, and Taxes--A Full-Plate Discussion for Small Businesses](https://reader035.fdocuments.net/reader035/viewer/2022062710/55a40f231a28ab413d8b4775/html5/thumbnails/1.jpg)
Page 0September 5, 2013
Taxes Under The Affordable Care Act
Taxes Under
The Affordable Care Act
Presented by:
Heather L. Martin, CPA
PYA Senior Manager
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Page 1September 5, 2013
Taxes Under The Affordable Care Act
For Self-employed Taxpayers
• Individual shared responsibility provisions
• Individual insurance marketplaces in place by
January 1, 2014
• Coverage through Medicaid expansion
• New Medicare assessment on net investment
income/net earnings
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Page 2September 5, 2013
Taxes Under The Affordable Care Act
For Employers with Less than
50 Employees
• Small business health insurance credit (fewer
than 25 employees only)
• Small Business Health Options Program
• Employer notice to employees of new health
insurance marketplace
• Summary of benefits and coverage disclosure
rules
• Medical loss ratio rebates
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Page 3September 5, 2013
Taxes Under The Affordable Care Act
For Employers with Less than
50 Employees
• Limits on FSA contributions
• Additional Medicare withholding on wages
• New Medicare assessment on NII
• 90-day maximum waiting period
• Transitional reinsurance program fees
• Workplace wellness programs
• Health insurance coverage reporting
requirements
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Page 4September 5, 2013
Taxes Under The Affordable Care Act
Our Agenda –
Taxes Old and New
• Additional tax on wages/net investment income
• Individual tax changes
• Employer shared responsibility in detail
• Small employer health insurance credit
• Changes to health insurance plans
• Premium tax credit
• Payroll considerations
• Return disclosure
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Page 5September 5, 2013
Taxes Under The Affordable Care Act
Additional .9% Tax on Wages
• For wages over $200,000 for single taxpayers or $250,000 for MFJ, an additional .9% tax applies.
• Employers are required to withhold this tax on any individual’s wages over $200,000 even if the tax will not ultimately be due.
• No employer match is assessed on this tax and no notification to the employee is required.
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Page 6September 5, 2013
Taxes Under The Affordable Care Act
Example
• Husband and wife file MFJ. Husband’s wages $250k. Wife’s wages $150k. Husband has add’l withholding on $50k (or $450). Wife has no add’l withholding. Tax assessed on $150k (over the $250k MFJ threshold) (or $1,350).
• Choice to increase W-4 withholding or pay with income tax filing (but subject to estimated tax requirements).
• Employer subject to penalties if not withheld and possibly tax if not remitted by employee.
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Page 7September 5, 2013
Taxes Under The Affordable Care Act
Additional 3.8% Tax on
Net Investment Income (NII)
• Tax calculated on the lesser of NII or the
excess of MAGI over the threshold amount
($250k MFJ, $200k single).
• Threshold amounts aren’t indexed for inflation
(i.e. more people over time will pay)
• NII includes non-business income from
interest, dividends, rents, net gains, and other
passive income.
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Page 8September 5, 2013
Taxes Under The Affordable Care Act
3.8% NII Tax Continued
• Deductions apply that are allocable to NII.
• Tax subject to estimated tax requirements
• Rents from an active trade or business aren’t
subject to the NII tax. However rents
normally don’t rise to “active” level of activity.
– Consider real estate professional tests.
– Consider grouping of activities.
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Page 9September 5, 2013
Taxes Under The Affordable Care Act
Net Gain Comments
• Net gains include sales of stocks, bonds, and
mutual funds, capital gain distributions, and gain
from the sale of real estate.
• Net gains cannot be reduced below zero in any
year (i.e. $3,000 capital loss doesn’t apply as
compared to regular income tax).
• If property disposed of is held in a trade or
business to which the NIIT doesn’t apply, NII
doesn’t include gain attributable to that property.
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Page 10September 5, 2013
Taxes Under The Affordable Care Act
Individual Tax Changes
• New 39.6% tax bracket
– Taxable income over $450k MFJ and $400k single
– Previously at 35% tax rate
• Increase in capital gains rate to 20% (from 15%) for income that would otherwise be taxed at 39.6%
– NII would probably also apply
– 23.8% total tax rate overall possible when previous 15%
• Phase-outs of exemptions and itemized deductions (again)
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Page 11September 5, 2013
Taxes Under The Affordable Care Act
Employer Shared Responsibility
• Responsibility begins at 50 or more full-time
equivalent (FTE) employees.
• Full-time employee – average of at least 30 hours
per week (e.g. 2 part-time 15-hour-per-week
employees = 1 FTE employee)
• Aggregate affiliated employers with common
ownership or those part of controlled group
• Generally, look to the prior calendar year for
employee count.
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Page 12September 5, 2013
Taxes Under The Affordable Care Act
Employer Shared
Responsibility Continued
• Penalty assessed if at least 1 employee receives
a credit for exchange coverage.
• If employer offers coverage, penalty assessed
equals the lesser of:
– Number of its full-time employees minus 30 multiplied
by $2,000.
– Number of full-time employees who receive credits
for exchange coverage multiplied by $3,000
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Page 13September 5, 2013
Taxes Under The Affordable Care Act
Employer Shared Responsibility
Continued
• If employer does not offer coverage, penalty
assessed equals the number of full-time
employees minus 30 multiplied by $2,000
• Employers not required to offer coverage to
part-time employees
• Reporting to monitor health plans offered to
employees – required in 2015.
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Page 14September 5, 2013
Taxes Under The Affordable Care Act
Small Employer
Health Insurance Credit
• Originally applied for 2010-2013 at 35%
• Credit available if 25 or fewer employees and average annual wages does not exceed $50,000, and employer pays at least 50% of premiums.
• Full credit if 10 or fewer employees with wages no more than $25,000
• Owners, self-employed individuals excluded
• Changes in 2014 related to exchanges, credit amount (50%), and availability period (2 years)
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Page 15September 5, 2013
Taxes Under The Affordable Care Act
Changes to
Health Insurance Plans
• Age of dependents on plan
• Other group health plan requirements
• PCORI fee
• Shared Individual Responsibility - 2014
• Shared Employer Responsibility
– Reporting required in 2015
– Reporting recommended for 2014
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Page 16September 5, 2013
Taxes Under The Affordable Care Act
Premium Tax Credits
• Subsidizes the cost to families of health
insurance purchased through an Exchange.
• Available on a sliding scale basis for families
between 100% and 400% of the poverty line.
• Based on the percentage of income that the
cost of premiums represent (2% to 9.5%)
• Benchmark plan - applicable second lowest
cost silver plan
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Page 17September 5, 2013
Taxes Under The Affordable Care Act
Payroll Considerations
• W-2 compliance
– “Aggregate cost of employer-sponsored health
coverage”
– If 250 or more W-2’s for the prior year, insurance
reporting is required for the current year
• Health FSA contribution limitation
– $2,500 in 2013
– Adjusted for inflation thereafter
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Page 18September 5, 2013
Taxes Under The Affordable Care Act
Return Disclosure Forthcoming
• Upon request from HHS, IRS must disclose
return information of any taxpayer whose
income is relevant in determining the
following:
– Premium tax credit
– Eligibility for state programs
• Items that could be disclosed include filing
status, number of dependents, and AGI.
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Page 19September 5, 2013
Taxes Under The Affordable Care Act
Items to Remember…
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Page 20September 5, 2013
Taxes Under The Affordable Care Act
For Employers with
50 or more Employees
• W-2 reporting of aggregate health care costs
• Employer shared responsibility provisions
• Employer notice to employees of new health
insurance marketplace
• Health insurance coverage reporting
requirements
• Summary of Benefits and Coverage
Disclosure rules
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Page 21September 5, 2013
Taxes Under The Affordable Care Act
For Employers with
50 or more Employees
• Medical loss ratio rebates
• Limits on FSA contributions
• Additional Medicare withholding on wages
• New Medicare assessment on NII
• 90-day maximum waiting period
• Transitional reinsurance programs fees
• Workplace wellness programs
![Page 23: ACA, Health Insurance, and Taxes--A Full-Plate Discussion for Small Businesses](https://reader035.fdocuments.net/reader035/viewer/2022062710/55a40f231a28ab413d8b4775/html5/thumbnails/23.jpg)
Page 22September 5, 2013
Taxes Under The Affordable Care Act
Taxes Under
Affordable Care Act
Presented by:
Heather L. Martin, CPA