Whether you’re self-employed or run a small business, here’s a quick look at what you need to know about the Affordable Care Act.
If you run an income-generating business with no employees, then you’re considered self-employed. You can get coverage through the Healthcare Marketplace and use it to find coverage that fits your needs.
Note: You are still considered self-employed even if you hire independent contractors to do work for you.
If you currently have individual insurance–a plan you bought yourself and not the kind you get through an employer–you may be able to change to a Marketplace plan.
Note: You can’t be denied coverage or charged more because you have a pre-existing health condition.
SMALL BUSINESS (50 or FEWER EMPLOYEES)
Your are considered a small business under the healthcare law if you have 50 or fewer full-time equivalent (FTE) employees (generally, workers whose income you report on a W-2 at the end of the year)
As a small business, you may get insurance for yourself and your employees through the SHOP (Small Business Health Options Programs) Marketplace. This applies to non-profit organizations as well.
Note: Beginning in 2016, the SHOP Marketplace will be open to employers with 100 or fewer FTEs.
As an employer, you must provide notification to your employees of coverage options available through the Marketplace and are required to provide this notice to all current employees and to each new employee regardless of plan enrollment status or full or part-time employment. The Department of Labor has sample notices that employers can use to comply with this regulation. One notice is for employers who do not offer a health care plan and the second for employers who offer a health care plan. http://www.dol.gov/ebsa/healthreform/regulations/coverageoptionsnotice.html
If you have fewer than 25 employees, you may qualify for the Small Business Tax Credit (see next section). Non-profit organizations may be eligible for the tax credit as well.
SMALL BUSINESS HEALTHCARE TAX CREDIT
Small businesses and tax-exempt organizations that meet all of the following conditions qualify::
- employ 25 or fewer, full-time equivalent workers
- with average incomes of $51,000 or less (adjusted annually for inflation)
- pay at least half (50 percent) of the premiums for employee health insurance coverage are eligible for the Small Business Health Care Tax Credit.
Starting in 2014, the tax credit is worth up to 50 percent of your contribution toward employees’ premium costs (up to 35 percent for tax-exempt employers). The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit is. For tax years 2010 through 2013, the maximum credit was a lesser amount: 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities.
Businesses that have already filed and later find that they qualified in 2013 or an earlier year can still claim the credit by filing an amended return for the affected years. A three-year statute of limitations normally applies to these refund claims.
Note: The credit is available only if you get coverage through the SHOP Marketplace and is available to eligible employers for two consecutive taxable years.
If you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. In addition, because the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit–in other words, both a credit and a deduction for employee premium payments.
The credit is refundable for small tax-exempt employers as well, so even if you have no taxable income, you may be eligible to receive the credit as a refund as long as it does not exceed your income tax withholding and Medicare tax liability.
There may be additional required fees and taxes related to the Affordable Care Act that could affect your business. You can learn in our November newsletter at https://holdsworthcpa.com/newsletter.php . If you have any questions about how it will affect you and your small business, please contact Holdsworth & Co. CPA’s accounting professionals at 928-445-8633.