Today we are going to talk about the Patient Protection and Affordable Care Act — specifically penalties for not offering health care coverage to employees.
The employer mandate will be effective on January 1, 2015. You can find more information about this in our previous blog, Health Care Reform Part 3.
Although the new law imposes penalties on certain businesses for not providing coverage to their employees, also known as the so-called “pay or play,” most small businesses won't have to worry about this provision. That’s because employers with fewer than 50 employees aren't subject to the “pay or play” penalty.
For businesses with at least 50 employees, the possible penalties vary depending on whether or not the employer offers health insurance to its employees. If it does NOT offer coverage and it has at least one full-time employee who receives a premium tax credit, the business will be assessed a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment.
So, for example, an employer with 51 employees, who doesn't offer health insurance to his employees will be subject to a penalty of $42,000.
51 employees - 30 (employees exempt from assessment)
= 21 employees x $2,000 = $42,000
Employers with at least 50 employees that offer coverage, but have at least one full-time employee receiving a premium tax credit (also allowed under the new law) will pay $3,000 for each employee receiving a premium credit. This is capped at the amount of the penalty that the employer would have been assessed for a failure to provide coverage, or $2,000 multiplied by the number of its full-time employees in excess of 30.
As you can see, the number of full time employees will be extremely important if you are not offering health insurance to your employees.
We’d like to let you know that we will be taking a break from Tax Tip Tuesday for the next two weeks.
But we are ready to help you! Please send us an email by clicking here, or give us a call at (515) 225-3141 to learn how this affects your tax situation.
Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.