Travis H. Long, CPA, Inc. Blog

Originally published in the Cedar Street Times

September 20, 2013

Change is challenging, and the current health reform laws are no exception.  And it is exceptionally challenging when the laws are constantly changing, vague, impossible to follow, or impossible to enforce!  In light of that commentary, I would like to enlighten business owners that they are supposed to notify employees of health care coverage options and the Health Insurance Marketplace by September 30th, even if they do not have or intend to provide health insurance.

The United States Department of Labor website contains two model notices that you can easily adapt and provide to your employees.  One of the notices is designed for employers that have a health insurance plan.  The other notice is designed for employers that do not have a health insurance plan and do not intend to provide health insurance.

If you go to http://www.dol.gov/ebsa/healthreform/ and look in the section titled “Notice to Employees of Coverage Options,” you will see the two notices and can even download the one you need as an editable Microsoft Word Document.  You can then fill out the section that provides contact information for the person in your company that can handle questions.  If you pick the notice for employers that have health insurance, then there is also a section to fill out about your health insurance plan.  Then you simply give them to your employees.

The notices essentially make people aware that the new law requires people, in most circumstances, to carry health insurance starting January 1, 2014, with an open enrollment period beginning October 1, 2013.  It also makes them aware they should be able to purchase health insurance through a Health Insurance Marketplace if their employers do not offer affordable coverage that meet certain standards.  The notices also try to explain there could be some tax benefits to assist with paying premiums depending on income levels.

It would be nearly impossible to enforce and unfair to penalize for noncompliance regarding this notice to employees given the mess the country is in trying to implement the Affordable Care Act.  Fortunately, the government recognizes this as well, and is saying they will not penalize businesses for failure to notice, even though the businesses should provide notification.

For people that fail to obtain health insurance, a self-imposed penalty is supposed to be reported on your 2014 tax return equal to the greater of two calculations.  The first calculation is one percent of the difference between your Adjusted Gross Income (AGI) and the minimum AGI required to file your tax return.  The second calculation is $95 for yourself and each of your dependents ($47.50 per person under 18) up to a maximum of $285.  Most people will therefore be looking at the one percent penalty.  In order to enforce this law, the IRS will be looking for statements from employers reporting details of employee coverages in company plans.  This reporting will be voluntary for 2014, which means many businesses will not report, and it will be very difficult for the IRS to enforce the penalty short of discovering it through an audit process.  In 2015 and 2016, the penalty is expected to rise substantially.

Prior articles are republished on my website at www.tlongcpa.com/blog.

IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.