September 20, 2014 by Tony Novak
On Wednesday September 17, 2014 the Internal Revenue Service hosted a live webinar about tax issues stemming from implementation of the Affordable Care Act. A recorded version of the Webinar will be available in a few weeks on the IRS.gov web site. These are a few of my take-away points or personal impressions only. The presentation handout is at http://www.visualwebcaster.com/files/100208/SBSE%20ACA%20Webinar%20PPT%20Final_pdf_version_blk_wht.pdf. Part of the presentation on the tax forms used for ACA compliance is included in the handout. Since instructions for the forms are not yet available, a detailed discussion of the forms is premature.
Another limitation on small business tax credit for non-profit employers?
I was previously unaware that the refundable non-profit business tax credit (normally limited to 35% of health insurance costs) is further limited by the amount of wage taxes paid by the employer. So for a small non-profit group like some of the environmental groups that I work with in South Jersey it might be tempting to say “We don’t pay much, but we’ll provide health benefits” to essentially recruit volunteer or low cost help. But apparently this strategy won’t work. (I’ve not taken the time yet to go back and check this verbal discussion with the language of the law or any other published guidance).
Q&A led by Richard Furlong
I was surprised by a couple of the side remarks by Richard Furlong:
His comment about the smaller population of people whose tax returns will be affected by the calculation of premium tax credits (and possible reconciliation) vs those affected by the individual mandate penalty. The very rough numbers reported elsewhere is that 10% of 40 million uninsured will be affected by the individual mandate penalty (other industry publications predict that 90% will qualify for an exception) in comparison to “the majority” of the roughly 10 million enrolled through an exchange who qualified for a subsidy. So I wonder what the Service’s thinking is on this issue. Are they implying disagreement with Kaiser Foundation research and other commentators? Does the Service really think that premium subsidy reconciliation issues will cause less gnashing of teeth at tax time for preparers and taxpayers than individual penalty issues? I think the opposite will prove to be the case.
Second, he went out of his way to pause and clarify that when he talked about qualifying coverage eligible for a subsidy, he meant coverage purchased through Healthcare.gov or a state exchange. What about the estimated 2+ million who bought coverage on a private exchange with a subsidy? Given the ongoing concerns about security issues at Healthcare.gov, as publicized as recently as yesterday by CBO, an increasing number of consumers feel safer using a private label insurance exchange with a good track record of security. Virtually every major health insurance company operates their own exchange today and offers to reduce premiums charged to the consumer by the amount of advance subsidy calculated. Why did Furlong go out of his way to exclude these providers in his commentary? Is there any implication? (I suppose not, probably just his personal bias. I have the opposite bias, having worked for some of the private exchange developers in the past). Given the option between Healthcare.gov and a private exchange portal, I would think that a well-informed consumer would logically choose the latter as long as they are convinced that the resulting coverage and costs will be the same. The comments here do not seem reassuring to consumers.
I thought that his comments about getting tax preparers in the mindset of incorporating ACA compliance into their tax season planning was the most valuable part of the webinar. His reminder that it is exactly 4 months until the official opening of tax season made me react “yikes”!
Review of basic ACA law
The bulk of the main portion of the webinar was likely of little use to CPAs who have been reading even the most basic publications about ACA. But it’s not the presenters’ fault that they are obligated to cover the basics again and again, much the same as the radio DJs of years ago played hit records over and over until we were sick of hearing them. At least we still remember all the lyrics so many years later.