Small Business Owners Scramble Over New Tax Form

The Affordable Care Act contains provisions that go into effect in 2016 pertaining to small businesses with no less than 50 full-time employees (or full-time equivalents). These rules are a continuation of ones already in place for businesses with at least 100 employees. Although 2016 is months away, the preparations are going on now, because employers have to record the monthly costs of employer-sponsored health plans for each employee. Yes, employers must track the out-of-pocket health care expenses that each employee faces, a difficult task to put it mildly.

Form 1095-C

The new 1095-C IRS form, “Employer-Provided Health Insurance Offer and Coverage,” is designed such that a copy is required for each employee, and just one employee’s data is recorded on each copy. The form is divided three sections:

Identification Information: The identity of the employer and employee, including name, address, Social Security Number and Employer Identification Number.

Employee Offer and Coverage: A three-row matrix with boxes for each month and for the total 12 months.

Row 1 reports special two-character codes (for example, 1A, 1B, etc.) that designate the form of coverage offered (or not offered) to the employee and to the employee’s dependents. If the employer offered the same coverage for all 12 months, it can record the appropriate code in the 12-month box alone. For instance, the employer might enter “1A” for a qualifying offer of minimum insurance coverage that fulfilled particular criteria.

Row 2 discloses the employee’s portion of the cheapest monthly premium for self-only minimum value coverage. This is how much the employee would have to pay to receive minimum coverage, rather than the amount the employee actually shelled out for choosing higher-quality coverage.

Row 3 provides a “safe harbor code” indicating why a particular employee did or didn’t get health care insurance for some or all of the year. For example, one reason would be that the person was not employed in certain months.

Covered Individuals: This part only covers employers who offer self-insured coverage. A six-row table pinpoints the months in which the employee and enrolled dependents were actually covered by the insurance. Each row names a single individual, including date of birth or Social Security number, followed by a set of monthly check boxes. If the person was covered for all 12 months, the employer just checks the 12-month box. The employer will need to use additional forms if the employee’s number of dependents exceeds five.

Torment or Nightmare?

However you slice it, Form 1095-C and the toil it requires is no picnic. The IRS instructions for the form number 14 pages of small print, which is better than the 84-pages of rules put out by the Department of the Treasury in 2014. Exacerbating the situation, only a handful of tax-preparation services are offering to prepare these forms for clients. Without available outsourcing, a small business’ bookkeeper will need a good spreadsheet program to record all the necessary data.. That’s daunting enough when done on a month-by-month basis as 2015 evolves, but it turns into a nightmarish torment if employers wait until year’s end to start the process. This explains why employers are scrambling now to record all the mandatory data while it’s readily available.

Intuit Steps Aside

Intuit, producer of the best-selling QuickBooks and TurboTax software, has chosen to not support Form 1095-C. Intuit spokesperson Stephen Sharpe explains, “The vast majority of our customers are not required to comply with this mandate, and the data required by these forms is not fully collected in our payroll application.” Thanks a lot! However, a few payroll services are delivering outsourced support for the form. One industry analyst estimated representative fees to be about $400 to initiate the service and $0.40 to do the processing for each employee. That might sound somewhat dear, but plenty of small business owners will decide that doing it themselves is much, much worse.

Don’t feel overwhelmed. Get ahead of the game and visit this link to watch this FREE webinar from one of the world’s largest accounting firms, PWC. See the webinar to explore more details on the ACA reporting requirements and some additional technical details to get your business prepared for 2016.

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