Impact of the Affordable Care Act on Businesses

By Yigang Xu, CPA
Greenville, SC

In the previous article “Tax Aspects of the Affordable Care Act”, I have discussed how the Affordable Care Act impact individuals and families by introducing new surtaxes, premium credit, penalties. In this article which is Part 3 I will be covering some basic rules ACA has on employers.

Small Employers:

Smaller employers with less than 50 employees can purchase insurance through the marketplace website, no shared responsibility payment or penalty applies to small employers. There is a small business health care tax credit available to certain small employers. Business with less than 25 full-time equivalent (FTE) employees with average annual wage of less than $50,000 will qualify.

For tax year 2013, the maximum credit rate is the same as the previous 3 years, which was 35% for small businesses and 25% for tax-exempt organizations. For tax year 2014 and 2015, the maximum credit rate has been increased to 50%, it is not a refundable credit for small businesses, but it may be carried forward or backward, the credit does not change the deduction of the health insurance.

For tax exempt organizations, this credit will be increased to 35% in 2014 and 2015, the credit is refundable and organizations need to file form 990-T to claim the refund. It applies to qualified churches too, as long as the clergy does not opt out of social security.

Larger Employers:

Employer with 50 or more full-time equivalent (FTE) employees are required to offer adequate coverage to full-time employees, or if one or more of its employees get a premium tax credit, a share responsibility penalty applies. In July 2013, this mandate has been postponed to Jan 1, 2015.

Larger employers also have an information only reporting requirement, but it is also postponed to Jan 1, 2015, although 2014 reporting is still optional.


Larger employer insurance mandate has been extended to Jan 1, 2015, small business which qualifies for health insurance credit will enjoy a better credit rate in 2014, tax-exempt organization’s health insurance credit rate has also been increased in 2014, this credit is refundable by filing Form 990-T.

Thanks for reading.

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