Health Reform and Taxes

HBS Tax Preparation Services

Since the Affordable Care Act’s inception in 2010, most professionals in the tax community have stood on the sidelines awaiting an outcome in the legislative contest between the Act’s backers and detractors.  Knowing this outcome was necessary in order for most tax professionals to justify investing the time and resources necessary to actually decipher the law’s 2,000+ pages that legislators admittedly did not read before passing. 

Over the past three years, some provisions of the Affordable Care Act have been delayed.  Other provisions have been waived for certain groups.  Many provisions, however, have plodded steadily ahead, including the individual mandate requiring average Americans to have health coverage.  The opening of the state health insurance exchanges on October 1st precedes this 2014 requirement.   

Suddenly , those who have taken a wait-and-see attitude regarding the law’s viability are scrambling to learn the effect of the 2,000 page law’s 20,000+ pages (a number that varies widely depending on the printer’s font size and political affiliation) of regulation.  The important thing to note here is that health care reform will directly impact the lives of every reader and place the IRS squarely in the middle of the administrative process.  In upcoming months, I hope to highlight how particular tax changes related to health care reform will impact American families and businesses.  In today’s column, I will highlight some health reform tax changes that have occurred in 2013 and can be expected next year.

Tax Changes - 2013:

Tax Changes - 2014:

Employer Mandate and Penalty Delayed to 2015:

On July 2, 2013, the Treasury Department announced a delay in the employer mandate from January 1st 2014 to January 1st 2015.  The Employer Mandate is highly complex and requires a great deal of calculation, information, and a flow chart to work through.  But, it essentially boils down to:  (1) employers being required to offer coverage and (2) that the coverage be affordable:

Mandate to Offer Coverage:

Employers who employ 50 or more full-time equivalent employees will be required to provide health insurance to their employees.  Employers who do not offer any coverage and have one or more employees who receive a “premium tax credit” or insurance exchange “subsidy” will have to pay a penalty/tax of $2,000 for each full-time employee (minus 30 employees).

Mandate to Offer Affordable Coverage:

Employers who employ 50 or more full-time equivalent employees and offer insurance will be required to pay a penalty of $3,000 per employee receiving the premium tax credit up to a maximum of $2,000 for each full-time equivalent employee (minus 30 employees) if either of the two following conditions exist:

  1. the insurance offered does not pay for at least 60% of the employee population’s health care costs, or
  2. any of the employer’s employees pay more than 9.5% of their family income to purchase the employer’s insurance.

This article has highlighted a few tax changes required by the Affordable Care Act in 2013 and 2014.  This article (or any article) should not be relied upon to make tax or financial decisions.  If you would like assistance wading through these new health reform tax regulations, please feel free to contact our office.

Brett Hersh's avatar
  • Author: Brett Hersh
  • Bio: Brett Hersh, EA, MBA, is the owner of HBS TAX & Small Business Experts. He is an Enrolled Agent (EA) with the IRS and licensed by the US Treasury Department to prepare all tax returns and represent taxpayers before the IRS for audits, collections and appeals. He is also Dave Ramsey’s ELP for Tax and Accounting, a continuing education instructor for tax professionals through Lorman Education, and a local speaker/presenter on the topics of tax and business growth. He can be reached at (304) 267-2594.