This article will discuss the tax provisions enacted as part of the Act and its implications and hardships that will be created for businesses and individuals.
Penalties (Taxes) on Large Businesses
Under the ACT, starting January 1, 2015 (this provision was to start January 1, 2014 but was postponed by President Obama), large businesses (employing 50 or more) are required to purchase health coverage for all full-time employees (more than 30 hours per week or, if the employer elects, at least 130 hours of service per month) [Prop. Regs. Sec 54.4980H-(a)(18)]. The 50 employee requirement is determined by the sum of all full-time employees and full-time equivalents for each calendar month in the preceding year, divided by 12. If the result is 50 or more, the employer is a large employer for the calendar year unless a seasonal worker exception applies. [Sec. 498H(c)(2)]. If employees are paid by the hour, actual hours of service are used. For non-hourly employees, the employer must count actual hours or apply an equivalent of eight hours daily or 40 hours per week, provided the method used does not substantially understate the employees hours of service that would cause the employees not to be treated as full time [Prop. Regs. Sec 54.4980H-(3)(b)]. To determine the 30 hours per week requirement, individually, but, in combination, are counted as full-time solely to determine if an employer is a large employer. The number of full-time employees is determined by calculating the average number of monthly hours of service by all employees who worked less than full-time (capped at 130 hours for any single employee) divided by 12 [Prop. Regs. Sec 54.4980H-(2)(c)] . The employer is considered to offer health care coverage to full-time employees and their dependents for a calendar month if, for that month, it offers such coverage to at least 95% of its full-time employees and their dependents [Prop. Regs. Sec 54.4980H-(4)(a)]. The previous information was taken from “Prop. Regs. Clarify ‘Play or Pay’ Rules of the Affordable Care Act”, The Tax Adviser, May 2013. Read More
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