Small businesses have a big task in deciphering IRS requirements for health care act

by Mandy Hicks

By Nathan Vinson, Attorney
English, Lucas, Priest and Owsley, LLP

If you own a small business, offering health insurance to your employees is likely one of your biggest headaches. There are an incredible number of options for health insurance, including the use of health savings accounts. Some small businesses have never offered it for those reasons, and because the costs of it can send a company’s expenses through the roof.

It’s understandable – and until recently, it was entirely legal. Employees could go elsewhere for insurance, such as through a spouse’s work or purchase it privately. But the Affordable Care Act changed all of that. The Act mandates that businesses offer health insurance to employees and their dependents. The rules were phased in over time (but they’re here now), and it’s only for those businesses that hit certain thresholds. An excellent Associated Press article recently outlined all of the thorny problems for small businesses. You can read that here.

Essentially, how it breaks down is this:

  • As of 2015, small business owners with 100 or more employees are obligated to provide insurance to employees.
  • As of 2016, small business owners with 50 or more employees are obligated, and those with fewer than 50 employees are exempt. The insurance must cover the employees’ dependents, but not their spouses.
  • Part-time, seasonal workers and even those fired during the year count, though there are some ways to calculate those so it doesn’t automatically push you over.

If you’re on the cusp of 50 or 100 and want to know if your business is considered a large employer, start by reading this information from the IRS. It will help you figure out if your small business falls under the provisions of the law.

Once you’ve done that, you can look through what the IRS requires of large or small businesses. The IRS has laid out provisions for large businesses here, and provisions for small businesses here in fairly simple terms (we were surprised too).

So what happens if you hit the threshold but don’t offer health insurance? Penalties happen. It can be substantial.

The big change that you’ll notice this year is that you’ll be required to provide a lot more information to the IRS in terms of who your company is covering as part of your health insurance offerings. You will have to provide social security numbers of everyone covered, including dependents, as the Associated Press article notes. Some companies have even had to hire seasonal help to get this information together.

The IRS has noticed that this paperwork is rather burdensome, and is extending the deadlines of when it has to be in. The 1095 forms, which have to be given to workers, must be filled out and returned to the employer by March 31. The 1094 forms are due to the IRS by May 31, if you’re submitting on paper, or if submitting electronically, by June 30.

Our best advice to you on this isn’t legal advice, it’s just common sense advice. Get going as early as possible on your tax work. Do not put it off. Be prepared to spend more on tax preparation with a professional if that’s something you usually hire out.

Of course, if you need a tax attorney, please contact me, attorney Nathan Vinson, at (270) 781-6500 or e-mail me at