The IRS and the Affordable Care Act

  • Robert S. Thomas,
  •   Taxation
  •   Comments Off on The IRS and the Affordable Care Act


Since it was signed into law in 2010, the Affordable Care Act, also known as the ACA, also known as “Obamacare”, has been a lightning rod of controversy. Half of the country loves it, while the other half seem to believe it is the worst piece of legislation created in generations. Regardless of which side you fall, it looks like the ACA is here to stay for the foreseeable future. It is therefore important for employers to understand how its tax provisions affect their businesses.

Businesses With Less than 50 Employees

If you run a business with 50 full time employees, including 50 full time equivalent (FTE) employees, you qualify to purchase and offer your employees a Small Business Health Options Program (or SHOP) plan through the ACA. In addition, if you purchase their insurance through the SHOP marketplace, cover at least half of your employees’ premium, and have less than 25 FTEs with wages of less than $52,000 per year, you may qualify to take a Small Business Health Care Tax Credit. An employer must complete Form 8491 to claim the credit, which can be claimed for two consecutive years and may be carried forward.

These small businesses also have reporting obligations, including reporting to the IRS how much employee insurance they covered and that was listed in employees’ W-2 forms. Further, if the business has employees who make over $200,000 per year, it must withhold and report an additional .9 percent of their wages.

Businesses With More than 50 Employees

Any type of employer with at least 50 FTEs in the previous calendar year are deemed “Applicable Large Employers” (ALEs) under the ACA. This subjects the employer to the “employer mandate”, technically known as Employer Shared Responsibility Provisions, which basically require large employers to either:

  • provide “affordable minimal essential” health insurance coverage for employees; or
  • make employer shared responsibility provision payments to the IRS.

In addition, large employers are required to file an annual return for each employee that describes the health care coverage the employer provides to its employees. Employees must also be furnished with this report. Employees that provide self-insured coverage are responsible for reporting additional information. Notably, employers with between 50 to 100 FTEs may still qualify to purchase SHOP plans for employees.

Call Robert S. Thomas, An Experienced Tax Attorney

Conforming with federal health insurance laws is a critical duty for business owners. The ACA requirements for employers can be a headache to navigate, but it is important to get it right. Contact the Law Offices of Robert S. Thomas for help. For over twenty years, I have offered tax advice to small business owners. Further, I earned my Master of Law Degree (LLM) in Taxation, and am licensed to practice in the United States Tax Court. If you are need professional tax advice, let me help you. Contact the Law Offices of Robert S. Thomas at 847-392-5893 for to schedule a consultation or visit our website today.

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