The Affordable Care Act applies an approach to common ownership that also applies for other tax and employee benefit purposes. This longstanding rule generally treats companies that have a common owner or similar relationship as a single employer. These are aggregated companies. The law combines these companies to determine whether they employ at least 50 full-time employees including full-time equivalents.
If the combined employee total meets the threshold, then each separate company is an applicable large employer. Each company – even those that do not individually meet the threshold – is subject to the employer shared responsibility provisions.
These rules for combining related employers do not determine whether a particular company owes an employer shared responsibility payment or the amount of any payment. The IRS will determine payments separately for each company.
For more information about how the employer shared responsibility provisions may affect your company, see our Questions and Answers on IRS.gov/aca. For details about how to determine if you are an applicable large employer, including the aggregation rules, see Determining If You Are an Applicable Large Employer.
The health care law contains tax provisions that affect employers. The size and structure of a workforce - small or large - helps determine which parts of the law apply to which employers. Calculating the number of employees is especially important for employers that have close to 50 employees or whose work force fluctuates during the year
The number of employees an employer has during the current year determines when it is an Applicable Large Employer (ALE) for the following year. ALEs are generally those with 50 or more full-time employees or full-time equivalent employees. Under the employer shared responsibility provision, ALEs are required to offer their full-time employees and dependents "affordable" coverage that provides a minimum value. Employers with fewer than 50 full-time or full-time equivalent employees are not applicable large employers.
The Affordable Care Act (ACA) can save your small business money through its tax credits.
If your small business has employees, you’ve undoubtedly been paying attention to the news coming out of Washington, D.C., about the Affordable Care Act (ACA). This law was designed to be implemented in waves, rather than all at once, and there have been major changes since it was passed and signed.
Some elements of the ACA have already been incorporated into the health care industry. One of these benefits is a tax credit for the health insurance costs you pay for your employees. For the years 2010-2013, small businesses could take a tax credit of 35 percent of the premiums paid for health insurance. Small tax-exempt businesses got a credit of 25 percent.
Starting in 2014, small business owners can take a tax credit up to 50 percent of the premiums they paid for health insurance. Tax-exempt small business owners’ credit will be 35 percent. This credit can be claimed for two consecutive tax years.
To be eligible for this credit, you will have to meet the following requirements:
This credit is refundable. This means that if you are a small business employer and did not owe tax during the year, you can get a refund on your return, which can be carried back or forward to other tax years. In addition, if you are an eligible small business, you can claim a business expense deduction for the premiums that are in excess of the credit.
In other words, not only do you get to take a credit for these costs, but you can also take a deduction for employee premium payments.
However, keep in mind that you are eligible to receive the credit and have it be refundable as long as it does not exceed your income tax withholding and Medicare tax liability. Further, if you are a small tax-exempt employer, any refund payments you receive are subject to sequestration.
If you’ve been working with us on tax planning for next year’s filing, you probably know all of this. If not, we encourage you to make an appointment to talk with us about your ACA-related issues – or any other tax questions you may have.