Since the inception of the Affordable Care Act (ACA) or the ObamaCare, there have been questions about how it affects small businesses. Well, the health care reform’s small business tax credits have been already helping many small establishments, while some larger firms are facing new requirements. The ACA offers incentives, such as tax credits and breaks through the Small Business Health Options Program (SHOP), to companies that have less than 25 full-time workers and make less than $50,000 in average annual pays, helping them offer good health benefits to their workers. For more information on this matter, here are some helpful FAQs on ObamaCare for small businesses.
Does The ACA Hurt Small Businesses?
To debunk one of the favorite talking points in the media whether the ObamaCare hurts small businesses or not, it is safe to say that the health care reform is helping most small businesses. Truth is, owners of these commercial establishments have, historically, faced more difficult times in providing themselves and their workers with insurance because of the ever increasing costs of insurance, while mostly those who own bigger companies have remained unaffected, thanks to the leverage buying that large group health plans are giving them.
What Positive Effects The ACA Has On Small Businesses?
The ObamaCare is designed to offer small businesses with cheap insurance options, increased purchasing power and cost assistance through the SHOP. Since small business enterprises with below 50 full-time equivalent employees (FTEs) can use the SHOP to take out better deals on employee insurance (well, they are required to do so), it is safe to say that these establishments will not be hurt by the health care reform, and will actually benefit from it.
What Negative Effects The ACA Has On Small Businesses?
While there are positive effects brought about by the ACA, there are also negative effects, such as costs passed onto the shareholders and consumers, working hours being cut, reduced hiring and more “out of pocket” costs for bigger companies. Generally, these are caused by some employers cutting hours to respond to the eminent employer mandate.
Am I Required To Buy Insurance For My Employees?
By understanding the ACA small business requirements, enterprises with more than 50 FTEs that do not offer insurance, offer insurance that does not meet the minimum standards set forth by the ACA or offer insurance that exceeds 9.5 percent of family income are required to pay a shared responsibility fee. Remember that the ObamaCare counts FTEs and not the number of full-time employees a business has. FTEs include part-time hours, along with the number of full-time employees, which means cutting workers to part-time will not save an employer from having the responsibility of providing health insurance to full-time workers only.
What Do “Full-Time Equivalent” (FTE) And Part-Time Equivalent (PTE) Mean?
The ObamaCare’s rules for employers often refer to companies with 25 or 50 FTEs. Simply put, FTEs equal the total number of full-time employees plus the number of PTEs divided by 30. Take note that business owners, contractors and seasonal employees do not count towards the total, and other particular types of employees, such as traveling sales personnel, must use some reasonable methods for crediting their work hours.
How Do I Claim For The ACA Small Business Tax Credit?
To claim for tax credits for health insurance premiums for a small business, you need to use the Form 8941 for calculations. If you have an organization that is tax exempt, you should include the amount on line 44f of the Form 990-T, which you must file to claim credits. When filing, include the amount of tax credits as part of your income tax return general business credit. Since 2014, you are allowed to claim tax credits through the SHOP.
How Will The ACA Small Business Tax Credit Work?
Companies having 25 or less FTEs and paying $25,000 of average annual wages are eligible for tax credits and those paying less than $10,000 in average annual wages with 10 or less FTEs can claim the full 50 percent. Also, small businesses that did not owe taxes during a year can carry their tax credits back or forward to other tax years. And if the amount of payments for health insurance premiums is more than the total credit, small businesses that are eligible for tax credits can still claim deduction for their expense for the premiums that exceed their credits, which is both a deduction and a credit for employee premium payments. For small tax-exempt employers, their tax credits are refundable, so even if they have no taxable income, they are still entitled to receive credits as a refund as long as they do not exceed their Medicare tax and income tax withholding liabilities.
Will I Receive Tax Breaks From Making My Employees Insured?
Your small business can apply for tax breaks of up to 35 percent (25 percent for non-profit organizations) of your employee premium contributions if you have under 25 full-time employees. To qualify, you should pay for at least 50 percent of your employee premiums, and your workers’ average annual pay should not be more than $50,000 per year.
Can I Buy Insurance On The Health Care Exchange If I Have Employer-Based Insurance?
Yes, but you will not qualify for tax credits and breaks, as well as help on up-front costs unless your employer provides sub-standard insurance or if the policy it provides to you costs more than 9.5 percent of your income. If your employer-based insurance is not able to meet these criteria, you will be eligible for subsidies, but before you will get covered, you need your employer to fill out an employer coverage tool form.
What Does The ACA Do With Small Business Taxes?
The ObamaCare utilize taxes, along with cuts from wasteful expenses in health care, to offer cost assistance that helps employees and employers afford quality health care. The law provides a number of benefits, including preventive services, which were not available to most Americans in the past.
What Are The Requirements For The Obamacare Small Business Insurance?
All insurance plans offered to employees must meet the minimum requirements of the ObamaCare. Take note that all plans purchased on the SHOP meet such requirements. Also, remember that high-end insurance plans are subject to a 40 percent excise tax in 2017.