Healthcare Tax Reform Is Here: Prep for End of the ACA Individual Mandate

Healthcare tax reforms

Take note of Affordable Care Act reporting requirements—and timing


The Tax Cuts and Jobs Act of 2017 (TCJA) continues to generate confusion when it comes to healthcare benefits and related issues. The bill, which is about to wrap up it’s second year on the books, ushered in changes to tax forms, withholding calculations, and employee fringe benefits rules. Human resources and payroll pros must be prepared to address reporting concerns—and avoid missing Affordable Care Act (ACA) deadlines.

More to come: Other key aspects to be aware of are changes to W-2 and W-4 forms, says payroll pro Dayna Reum, and there are legislative updates in the pipeline for 2019 that also bear close watching. Reum details the impact of the Tax Cuts and Jobs Act on payroll and healthcare benefits in her webinar for Audio Solutionz, “Adapt to Healthcare Tax Reform: Benefits, Income Tax & Payroll for 2019.”

One More Time for the Individual Mandate Penalty

One of the ACA’s keystones was the individual mandate penalty—a fee due for any month that a person, their spouse, or their tax dependents don’t have qualifying health coverage. Fees are to be paid when filing federal tax returns. Using the per-person method of paying, the fee is $695 per adult, $347.50 per child under 18, with a household cap of $2,085.

The TCJA scrapped that fee; tax year 2018 is the final year that Form 1095 will be used for determining if a penalty is due. In 2016, reported Kaiser Health News, about 6.5 million Americans paid an average penalty of $470 for going without health insurance. In all, the IRS collected about $3 billion.

H&R Block notes that taxpayers who are eligible can claim a penalty exemption using Form 8695.

Attention ALE: File Forms 1094-C & 1095-C On Time

For tax year 2018, employers should take careful note of Affordable Care Act reporting and timing requirements, caution attorneys at Conner Strong & Buckelew. If you’re a formally designated applicable large employer (ALE), you must furnish each full-time employee with Form 1095-C by January 31, 2019. Forms 1094-C and 1095-C need to be filed by February 29 (or April 1, if filing electronically). Resources for all forms are available at the IRS’ ACA Information Center.

Check your status: “Employers must determine their ALE status each calendar year based on the average size of your workforce during the prior year,” the IRS notes. “Employers that had at least 50 full-time employees, including full-time equivalent employees, on average last year, are most likely an ALE for the current year.”

Understand the Impact of Healthcare Tax Reform on Your Business

There are a number of ACA tax-related provisions your company should be aware of when making financial and benefits decisions, reports The Balance:

  • Employers with fewer than 25 employees may quality for a 50-percent tax credit for health insurance if average wages are less than $50,000 and the employer pays at least half of the premiums; the deal does not apply to owners’ health insurance costs.
  • Employers with fewer than 50 employees can use health insurance exchanges to help find the cheapest plans.
  • Employers with 50 or more employees must pay an excise tax of $2,000 per employee if they don’t provide health insurance, though there is an exception for the first 30 employees.
  • All employers can get federal financial help if they offer health insurance for early retirees from 55-64 years old.
  • All employers can get a 28-percent tax credit for drug costs if they provide prescription coverage for retired workers.

There are plenty of provisions to be aware of as the tax year comes to a close, says Reum—take the time to familiarize yourself with tax year 2018 rules now.

(This post first appeared in an AudioSolutionz blog)

By Jeff S on 22nd October 2019

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