New requirements for Small Business under The Employer Mandate of the Affordable Care Act

The Employer Mandate of the Affordable Care Act was extended to 2015 this past July.  However, the Department of Labor requires that a new form be sent to all employees by October 1, 2013. 

If your company has revenue greater than $500,000 and has one or more employees, a required form titled “Notice to Employees of Health Insurance Marketplace Coverage Options” must be sent to each employee which must include an analysis of whether the employer's health plan meets the "Minimum Value" and is "affordable" as defined in the IRS code. 

If you have any questions, please call our office

MANDATORY HEALTH INSURANCE WILL BEGIN IN 2014

Beginning in 2014 the Patient Protection & Affordable Care Act (the health care legislation sometimes known as Obama Care) will impose the new requirement that U.S. persons, with certain exceptions, have minimal, essential health care insurance.

A minimum essential health care policy is one in which the insurer pays 60% of the average medical expenses incurred by an average person over the course of one year.

How this will affect your family will depend upon a number of issues:

Already insured - If you will already be insured through an employer plan, Medicare, Medicaid, the Veterans Administration, or a private plan that provides minimal, essential care, then you will not be subject to any penalties under this new law.

Exempt from the mandatory insurance requirement - The following individuals will be exempt from the insurance mandate and will not be subject to a penalty for being uninsured:

·    Individuals who have a religious exemption

·    Those not lawfully present in the United States

·    Incarcerated individual

·    Those who cannot afford coverage based on formulas contained in the law

·    Those who have income below the federal income tax filing threshold

·    Those who are members of Indian tribes

·    Those who were uninsured for short coverage gaps of less than three months

·    Those who have received a hardship waiver from the Secretary of Health and Human Services, who are residing outside of the United States, or who are bona fide residents of any possession of the United States.

Cannot afford coverage - Individuals and families whose household income is between 100% and 400% of the federal poverty level will qualify for a varying amount of subsidy to help pay for the insurance in the form of a Premium Assistance Credit. To qualify for that credit, the insurance must be acquired from an American Health Benefit Exchange operated by the individual or family’s state, or by the Federal Government. These exchanges are scheduled to be up and running as of October 1, 2013, and the policies purchased through them will be effective as of January 1, 2014.

It is important to note that the subsidy is really just a tax credit based upon family income. It can be estimated in advance and used to reduce the monthly insurance premiums; it can be claimed as a refundable credit on the tax return for the year; or it can be some combination of both. However, it is based upon the current year’s income and must be reconciled on the tax return for the year. If too much was used as a premium subsidy, it must be repaid. If there is excess, it is refundable.

If household income is below 100% of the poverty level, the individual or family qualifies for Medicaid.

Penalty for noncompliance - The penalty for noncompliance will be the greater of either a flat dollar amount or a percentage of income:

·    For 2014, $95 per uninsured adult ($47.50 for a child) or 1 percent of household income over the income tax filing threshold

·    For 2015, $325 per uninsured adult ($162.50 for a child) or 2 percent of household income over the income tax filing threshold

·    For 2016 and beyond, $695 per uninsured adult ($347.50 for a child) or 2.5 percent of household income over the income tax filing threshold.

Flat dollar amounts - The flat dollar amount for a family will be capped at 300% of the adult amount. For example, the maximum in 2016 for a family will be $2,085 (300% of $695). The child rate will apply to family members under the age of 18.

Overall penalty cap - The overall penalty will be capped at the national average premium for a minimal, essential coverage plan purchased through an exchange. This amount won’t be known until a later date.

If you have any questions as to how this new insurance requireme

Prepared for the New Surtax?

As part of Obama Care, we have a new tax beginning in 2013. The official name of this tax is the “Unearned Income Medicare Contribution Tax,” and even though the name implies it is a contribution, don't get the idea you deduct it as a charitable contribution. It is, in actuality, a surtax levied on the net investment income of higher-income taxpayers.

The surtax is 3.8% on the lesser of your net investment income or the excess of your modified adjusted gross income (MAGI) over a threshold based on your filing status. MAGI is your regular AGI increased by income excluded for working out of the country; net investment income is your investment income reduced by investment expenses.

The filing status threshold amounts are:

·  $250,000 for married taxpayers filing jointly and surviving spouses.

·  $125,000 for married taxpayers filing separately.

·  $200,000 for single and head of household filers.

Example - A single taxpayer has net investment income of $100,000 and MAGI of $220,000. The taxpayer would pay a Medicare contribution tax only on the $20,000 amount by which his MAGI exceeds his threshold amount of $200,000, because that is less than his net investment income of $100,000. Thus, the taxpayer's Medicare contribution tax would be $760 ($20,000 × 3.8%).

Investment income includes:

·  Interest, dividends, annuities (but not distributions from IRAs or qualified retirement plans), and royalties,

·  Rents (other than derived from a trade or business),

·  Capital gains (other than derived from a trade or business),

·  Home sale gain in excess of the allowable home gain exclusion,

·  Your child's investment income in excess of the excludable threshold if, when eligible, you elect to include your child's investment income on your return,

·  Trade or business income that is a Sec. 469 passive activity with respect to the taxpayer, and

·  Trade or business income with respect to trading financial instruments or commodities.

Planning Note: for surtax purposes, gross income doesn't include interest on tax-exempt bonds. Thus, one can avoid the net investment income surtax by investing in tax-exempt bonds.

Investment expenses include:

·  Investment interest expense,

·  Investment advisory and brokerage fees,

·  Expenses related to rental and royalty income, and

·  State and local income taxes properly allocable to items included in Net Investment Income.

Do you think you will never get hit with this tax because your income is way under the threshold amounts? Don't be so sure. When you sell your home, the gain is a capital gain, and to the extent that the gain is not excludable using the home gain exclusion, it will add to your income, and possibly push you above the taxation thresholds. And, since capital gains are investment income, you might be in for a surprise. The same holds true for gains from selling stock and a second home. So when planning to sell a capital asset, be sure to consider the impact of this new surtax.

The surtax also applies to undistributed net investment income of trusts and estates, and there are special rules applying to the sale of partnership and Sub-S Corporation interests.

If this surtax will apply to you in 2013, you may need to increase your income tax withholding or estimated tax payments to cover the additional tax so you can avoid or minimize an underpayment of estimated tax penalty when you file your 2013 return.

If you have questions about this new tax or wish to do some related tax planning, please give this office a call.