The recent healthcare bill legislation,the Patient Protection and Affordable Care Act, outlines a number of important changes for small business owners; and especially for high income tax payers.
While many of the provisions do not start until 2014 its clear that the recent legislation will have notable impact for years to come.
The majority of businesses with fewer than fifty (50) employees will be exempt from the mandate; however one notable exception is the construction industry where employers with 5 full‐time employees and whose annual payroll is in excess of $250,000 will be subject to the recent legislation.
How the HealthCare Bill Will Impact Business Owners:
Tax Ramifications >>
- W-2 Reporting: Beginning in 2011, employers will be required to disclose the value of the health care coverage provided by the employer to each employee on the employee’s annual W-2.
- Beginning in 2013, the 1.45% employee portion of Medicare tax will increase by 0.9 percentage points for taxpayers with earned income in excess of $200,000, or $250,000 for joint filers. Any tax not fully withheld and sent to the government by the employer must be paid by the employee through their tax return. This also applies to self-employment income.
- Also in 2013, taxpayers with adjusted income more than $200,000 ($250,000 for joint filers) will be subject to an additional 3.8% tax on net investment income (such as interest, dividends, capital gains).
- By 2018, high-end health plans with premiums of more than $10,200 for an individual policy per individual and $27,500 per family — not including vision and dental — would be subjected to a "Cadillac" tax. (The average cost of a family plan in 2009 was $13,375, with employees on average paying $3,515 and employers paying $9,860, according to the Kaiser Family Foundation.) The excise tax would be paid by employers that self-insure (most large firms do) and insurance companies, but small-business experts expect these costs to be passed along to smaller firms via premium increases.
- Changes for tax payers whom contribute to flexible spending accounts (FSAs) or health savings accounts (HSAs):
- Beginning in 2011, only prescribed drugs and insulin will be reimbursable through flexible spending accounts or health savings accounts. As a result, over-the-counter drugs such as aspirin or medical-related items such as bandages will no longer be qualified expenses for HSA or FSA purposes.
- Beginning in 2013, the annual contribution to a flexible spending account is limited to $2,500. The current limit is $5,000.
- The penalty for non-qualified distributions from health savings accounts increases from 10% to 20% in 2011.
Employer Mandates for Employers with Greater than 50 Employees >> Effective in 2014, employers with 50 or more employees or pay a penalty of $750 a year per full-time worker. The coverage offered will also have to meet minimum benefits -- covering both a specific set of services and 60% of employee health costs overall -- or else employers will face additional penalties.
Part-time employees are counted toward the 50-employee minimum on pro-rated basis based on hours worked, bringing more small businesses into the group required to provide coverage.
Small Businesses with less than 25 employees and on average offer annual wages of less than $50,000 impact >>
Small business employers that provide health insurance for employees will be eligible for a tax credit of up to 50% of the premiums paid by the employer.
Self-Employed Business Owners >> By 2014, the self-employed and those who don't get work-provided coverage can get benefits through Small Business Health Options Programs (SHOPs). These state-run marketplace exchanges will work with carriers to pool insurance options, with the hope that costs will be lower for a larger, more powerful, group. By no later than 2014, states will have to set up Small Business Health Options Programs, or "SHOP Exchanges," where small businesses will be able to pool together to buy insurance. ("Small businesses" are defined as those with no more than 100 employees, though states have the option of limiting pools to companies with 50 or fewer employees through 2016; companies that grow beyond the size limit will also be grandfathered in.)
Read more details about here: Healthcare Bill’s Impact on Small Business