Dear Clients and Friends:
To assist you with your year-end filings, we would like to take this opportunity to review with you the rules brought about by the Affordable Care Act as well as to remind you of Form 1099 requirements.
The Affordable Care Act continues with the same filing requirements in 2016 that were adopted during the 2015 tax year. However, penalties have stiffened and filing due dates have been moved forward for 2016. The Affordable Care Act continues to classify employers as either a small employer or large employer, each of which will face different requirements:
- Defined as having fewer than 50 full-time employees
- Exempt from W-2 insurance reporting requirements
- Exempt from filing forms 1094-C and 1095-C and related penalties
- Insurance companies are required to file any applicable forms such as 1094-B and 1095-B
Large Employers (also known as an "ALE")
- Defined as having 50 or more full-time employees
- Required to file Forms 1094-C and 1095-C, regardless of whether or not the employer offers health coverage or if employee waives coverage that was offered. These forms should be furnished to the employees by February 28, 2017. Due dates to file with the IRS are extended to March 31, 2017 if filing electronically.
- Subject to a $2,160 penalty per full-time employee for not offering health coverage to substantially all full-time employees (and dependents), excluding the first 30 employees.
- Employers who offer coverage may still be subject to a penalty if the coverage is not affordable or does not provide minimum value. This penalty is the lesser of either $3,240 per full-time employee receiving a federal subsidy for coverage purchased on an exchange or $2,160 per full-time employee, excluding the first 30 employees.
- ALE is exempt from any penalties for failure to provide health coverage in 2016 if it offers coverage to at least 95% of its full-time employees.
- Required to report insurance information on W-2 if employer files more than 250 W-2 forms. Continues to be non-taxable to recipient of W-2.
We strongly encourage you to contact your payroll provider as soon as possible to ensure that these filing requirements are being met for 2016 and forward. As has been reported in the news media of late, it is likely that the new Federal Administration may repeal some or all of the Affordable Care Act components but the details are not known at this time.
1099 Forms are due in just a few weeks on January 31st. The classification of your workers as "employees" or "independent contractors" remains a "hot topic" with the IRS, even though some guidelines have been released intending to simplify this area. (click here for our detailed letter).
Per IRS regulation, 1099s are due for each non-corporate vendor to whom you have paid during the year:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt income
- At least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments
- Gross proceeds of $600 or more paid to an attorney (even if they are incorporated)
We are available to prepare your Forms 1099. For each independent contractor (individual, partnership, LLP, LLC, or attorney) to whom you paid $600 or more during the 2016 calendar year, please provide the following information:
- Formal name/business name
- Social Security Number or Taxpayer ID Number
- Amount paid in 2016
Smith Dickson, An Accountancy Corporation.