Wednesday, May 20, 2015

The Affordable Care Act and Employers: Why Workforce Size Matters

RS Health Care Tax Tip 2015-30, May 6, 2015

The Affordable Care Act contains several tax provisions that affect employers. Under the ACA, the size and structure of a workforce – small, or large – helps determine which parts of the law apply to which employers.

The number of employees an employer had during the prior year determines whether it is an applicable large employer for the current year. This is important because two provisions of the Affordable Care Act apply only to applicable large employers. These are the employer shared responsibility provision and the employer information reporting provisions for offers of minimum essential coverage.

An employer’s size is determined by the number of its employees.
  • An employer with 50 or more full-time employees or full-time equivalents is considered an applicable large employer – also known as an ALE – under the ACA.
  • For purposes of the employer shared responsibility provision, the number of employees a business had during the prior year determines whether it is an ALE the current year. Employers make this calculation by averaging the number of employees they had throughout the year, which takes into account workforce fluctuations many employers experience.
  • Employers with fewer than 50 full-time or full-time equivalent employees are not applicable large employers.
  • Calculating the number of employees is especially important for employers that have close to 50 employees or whose work force fluctuates during the year.
To determine its workforce size for a year, an employer adds the total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year. The employer then divides that combined total by 12.

For more information, visit our Determining if an Employer is an Applicable Large Employer page on IRS.gov/aca.

Small Business Retirement Plan Penalty Relief Expires Soon



You still have time to file retirement plan tax returns for your small business. Under the IRS special penalty relief program, you can avoid stiff penalties for filing late. However, you must act soon. Here are some key points you should know about this program:
  • Late Filing Penalties.  Plan administrators and sponsors who fail to file required forms can face penalties of up to $15,000 per return. The plan usually must file Form 5500-EZ each year.
  • Penalty Relief Deadline.  A special program provides penalty relief for late filers. Those who are eligible can avoid these penalties by filing late returns by June 2, 2015.
  • Relief to Certain Plans.  In general, this program is open to certain small business plans. These include owner-spouse plans, plans of business partnerships (together, “one-participant plans”) and certain foreign plans.
  • Penalty Already Assessed.  If you have already been assessed a penalty for late filings you are not eligible for this program.
  • One-Year Pilot.  The IRS launched this program on June 2, 2014, as a one-year pilot. It can help small businesses that may have been unaware of their plan’s filing requirements. So far, the IRS has received about 6,000 late returns under the program.
  • Multiple Late Returns.  You may apply for relief for multiple late returns in a single submission under this program.
  • No Fee Required.  The IRS does not charge a filing fee or require a payment to apply for this relief.
Additional IRS Resources:

Find out how ACA affects Employers with 50 or more Employees



Some of the provisions of the Affordable Care Act, or health care law, apply only to large employers, which are generally those with 50 or more full-time equivalent employees. These employers are considered applicable large employers – also known as ALEs – and are subject to the employer shared responsibility provisions and the annual employer information return provisions. For example, in 2016 applicable large employers will have annual reporting responsibilities concerning whether and what health insurance they offered in 2015 to their full-time employees.

All employers, regardless of size, that provide self-insured health coverage must file an annual return reporting certain information for individuals they cover. The first returns are due to be filed in 2016 for the year 2015.

Effective for calendar year 2015, ALEs with 100 or more full-time or full-time equivalent employees will be subject to the employer shared responsibility provision and therefore may have to make a shared responsibility payment. This applies to employers that do not offer adequate, affordable coverage to their full-time employees and one or more of those employees get a premium tax credit. The employer shared responsibility provisions will be phased in for smaller ALEs from 2015 to 2016.

Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates throughout the year. To determine its workforce size for a year an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divides that total number by 12.

Employers with more than 50 cannot purchase health insurance coverage for its employees through the Small Business Health Options Program – better known as the SHOP Marketplace. However, Employers that have exactly 50 employees can purchase coverage for their employees through the SHOP.

For more information, visit our Determining if an Employer is an Applicable Large Employer page on IRS.gov/aca.

Wednesday, May 13, 2015

Find out how ACA affects Employers with fewer than 50 Employees


Most employers have fewer than 50 full-time employees or full-time equivalent employees and are therefore not subject to the Affordable Care Act’s employer shared responsibility provision.

If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year.  Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year. Employers with 50 or fewer employees can purchase health insurance coverage for its employees through the Small Business Health Options Program – better known as the SHOP Marketplace.

Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates throughout the year. To determine its workforce size for a year an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year, and divides that total number by 12.

Employers that have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000 may be eligible for the small business health care tax credit if they cover at least 50 percent of their full-time employees’ premium costs and generally, after 2013, if they purchase coverage through the SHOP.

All employers, regardless of size, that provide self-insured health coverage must file an annual information return reporting certain information for individuals they cover. The first returns are due to be filed in 2016 for coverage provided during 2015.

For more information, visit our Determining if an Employer is an Applicable Large Employer page on IRS.gov/aca.

Wednesday, May 6, 2015

The Affordable Care Act and Employers: Why Workforce Size Matters



The Affordable Care Act contains several tax provisions that affect employers. Under the ACA, the size and structure of a workforce – small, or large – helps determine which parts of the law apply to which employers.

The number of employees an employer had during the prior year determines whether it is an applicable large employer for the current year. This is important because two provisions of the Affordable Care Act apply only to applicable large employers. These are the employer shared responsibility provision and the employer information reporting provisions for offers of minimum essential coverage.

An employer’s size is determined by the number of its employees.
  • An employer with 50 or more full-time employees or full-time equivalents is considered an applicable large employer – also known as an ALE – under the ACA.
  • For purposes of the employer shared responsibility provision, the number of employees a business had during the prior year determines whether it is an ALE the current year. Employers make this calculation by averaging the number of employees they had throughout the year, which takes into account workforce fluctuations many employers experience.
  • Employers with fewer than 50 full-time or full-time equivalent employees are not applicable large employers.
  • Calculating the number of employees is especially important for employers that have close to 50 employees or whose work force fluctuates during the year.
To determine its workforce size for a year, an employer adds the total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year. The employer then divides that combined total by 12.

For more information, visit our Determining if an Employer is an Applicable Large Employer page on IRS.gov/aca.

IRS Helps Beauty and Barber Shops Start, Grow and Succeed



IRS recognizes Small Business Week May 4 – 8, 2015, by highlighting some of its most popular educational products, videos and webinars to help your business thrive. If you own a beauty or barber shop, or are self-employed, visit IRS.gov for all your tax needs. Knowing the tax rules can help your business start, grow and succeed. For example, see IRS Publication 4902, Tips for the Cosmetology and Barber Industry. Here are some of the topics included in this booklet or detailed on IRS.gov:
  • Business Structure.  One of the first things you need to decide is the type of structure for your business. The most common types are sole proprietor, partnership or corporation. The type of business you choose will determine which tax forms you will file. You may have employees or rent space to someone who is self-employed. Visit IRS.gov for tips on starting and operating your business.
  • Report Tip Income.  All tips you receive are taxable income. If you have employees who receive $20 or more in cash tips in any one month, they must report them to you. You must withhold federal income, Social Security and Medicare taxes on the reported tips. Learn more about these rules in the IRS video “Reporting Tips.”
  • Business Expenses.  You can deduct ordinary and necessary expenses that you pay to run your business. An ordinary expense is a common and accepted cost for that type of business. A necessary expense is a cost that is proper for that business. For example, cosmetologists are often required to get a license or pay for a permit or certification. You can deduct these costs as business expenses in most cases. See Publication 535, Business Expenses for more on this topic.  
  • Estimated Tax.  If you are self-employed you may need to make estimated tax payments. In most cases you pay this tax in four installments each year. If you do not pay enough tax during the year, you may owe a penalty. Use Form 1040-ES, Estimated Tax for Individuals to figure the tax. Direct Pay, available on IRS.gov, now offers you the fastest and easiest way to make these payments.   
  • Depreciation of Assets. You can deduct the cost of some assets over a number of years. For example, if you buy equipment and furniture, you should depreciate the cost of those items since you will normally use them for more than one year. Check out the IRS webinar “Depreciation Basics” to learn more.
  • Filing Your Taxes.  If you have employees, the IRS offers electronic filing options for your federal payroll tax returns. IRS e-file is fast, safe and accurate. You'll also receive an electronic acknowledgment when the IRS accepts your e-filed return. You can use EFTPS to make any federal tax payments.
  • Keeping Records.  Everyone in business must keep records. You need good records to prepare your tax returns. You must have records to support the income, expenses, and credits that you report. Good records can help you keep track of your business. They can also increase the likelihood of business success. Watch the IRS video “Good Recordkeeping Helps Avoid Headaches at Tax Time” to find out some of the best practices.
Additional IRS References: