Business Owners Prepare For New Tax Form

Article written by EricBank

The Affordable Care Act has provisions that come due in 2016 affecting small businesses with at least 50 full-time employees or equivalents. These provisions are an extension of existing ones covering businesses with 100+ employees. Although 2016 is a while off, the preparations are occurring right now, because employers have to keep track of the monthly costs per employee of employer-sponsored health plans. Employers must report the out-of-pocket health care expenses of each employee, a daunting task to say the least.

Form 1095-C

The new tax form, 1095-C "Employer-Provided Health Insurance Offer and Coverage," is formatted such that one copy is needed for each employee, and only one employee's information is reported on each copy. The form has three sections:

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

     II.          Employee Offer and Coverage: A three-row table with entries for each month and for the total year. Row 1 records two-character codes (e.g. 1A, 1B, etc.) that denote the type coverage offered (or not offered) to the employee and the employee's family. If the same coverage was offered all 12 months, you can enter the code in the 12-month box only. For example, you would enter 1A for a qualifying offer of minimum coverage that met certain criteria. Row 2 reports the employee share of lowest cost monthly premium for self-only minimum value coverage. This is the amount the employee would have to pay to get minimum coverage, not the amount the employee actually paid if electing better-than-minimum coverage. Row 3 reports a "safe harbor code" explaining why a particular was or wasn't offered health care insurance for all or part of the year, for reasons such as not being employed in a particular month.

    III.          Covered Individuals: This part pertains only to employers who provide self-insured coverage. A six-row matrix identifies the months in which the employee and enrolled spouse and/or dependents were actually covered by the health plan. Each row identifies one individual, including Social Security number or date of birth, and a block of monthly check boxes. If the individual was covered the entire year, you check just the 12-month box. Use additional forms if the employee has more than five dependents.

Nightmare or Torment?

However you conceive of it, Form 1095-C and the work it represents is no day at the beach. The IRS instruction booklet for the form is 14 pages of tiny print, which is an improvement over the 84-pages of guidelines issued by the Treasury Department in 2014. To make matters worse, few tax-preparation services are stepping up to the plate and offering to take responsibility for preparing these forms. If outsourcing isn't available, a small business owner's accountant will need to have one good spreadsheet program to track all the information required. That might be hard enough to do month by month as 2015 progresses, but it becomes a tormenting nightmare if employers put it off until the end of the year. Hence the need for employers to scramble now to record all the required information while its freshly obtainable.

Intuit Bugs Out

Intuit, maker of the top-selling TurboTax and QuickBooks software, has decided not to support Form 1095-C. According to Intuit spokesperson Stephen Sharpe, "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." Cold comfort! However, some payroll services are providing outsourced support. One expert cites typical fees of $400 to set up the service and $0.40 to process each employee. That might sound pretty steep, but for many small business owners, the alternative of doing it themselves is far, far worse.