PAYDAY Workforce Solutions Blog

Affordable Care Act penalties are set to kick in for as many as 6 million people who didn’t obtain health insurance in 2014. The penalties are as much as one percent of income and will apply to up to four percent of all 2014 taxpayers. Expanded coverage options, financial assistance, and penalties for noncompliance are incentives to enroll.

IRS Form 1040 in 2015, for filing 2014 federal income taxes, has a new line 61 asking about health insurance coverage. It won’t make any difference in filing for those who had health coverage in 2014, but those who didn’t will have to take some additional steps. Some will be able to claim an exemption and some will have to pay a fee. For those not covered in 2014, the government is allowing various exemptions from the requirement to carry insurance such as a death in the family, domestic violence, or if a person’s 2013 coverage was cancelled.

IRS assistant secretary for tax policy Mark Mazur says the IRS is expecting additional workloads this tax season as the first year people will have to deal with penalties for not getting coverage they could have afforded. He says taxpayers should expect the toll-free phone lines will be busier than usual.

New Tax Forms

A new tax form that some taxpayers have seen in 2015 is the 1095-A, Health Insurance Marketplace Statement. Anyone who enrolled in insurance through the Health Insurance Marketplace in 2014 should have received Form 1095-A from the Marketplace and will need it to file their taxes.

Taxpayers should understand that the 1095-A is not issued by employers or by the IRS but by the Marketplace. Therefore, an individual should go back to the Marketplace they received coverage from if they are expecting, but have not received Form 1095-A or if they feel there are errors on the form they did receive.

The information on Form 1095-A is used to calculate the amount of premium tax credit claimed on tax returns and is used with Premium Tax Credit (PTC) Form 8962. Form 8962 specifically requests information from Form 1095-A for completion.

About 8 million people purchased healthcare policies through the government-run insurance exchanges in 2014, and of those, about 85 percent received subsidies. The IRS expected to send as many as six million 1095-As this tax season, out of 150 million income tax filings.

Tax penalties for not obtaining eligible insurance coverage in 2014 start at $95 and can run into thousands of dollars for a wealthy family.

Employer Penalties

ACA penalties for employers are not taking effect this tax season as they are for individual taxpayers. While the law requires any business with the equivalent of 50 or more full-time employees (FTE’s) to offer coverage that is affordable and of minimum value or pay a fine, employers with 50 to 99 FTE’s have until 2016 to comply. Employers with 100 or more FTE’s must meet the requirements for 2015.

The ACA defines affordable coverage as costing employees no more than 9.5 percent of their W-2 income, and minimum value standards means coverage must pay at least 60 percent of costs.

Employers at 50 or more FTE’s must also file their own forms, either 1094 and 1095 C, or 1094 and 1095 B, depending on whether or not they’re self-funded. A common misconception among employers is that if they are 50-99 employees, they are exempt from all requirements in 2015. This is far from the case, and Forms 1094 and 1095 are a good example. Employers could face fines of up to $50 per required form, amounting to thousands of dollars in penalties for not filing or filing incorrectly.

Contact us now to see how PAYDAY’s payroll software and dedicated reps can manage these critical elements of ACA and ensure that your company is in compliance.

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