A summary of changes for small business tax return preparers
Tax return preparers and small business owners filing federal tax returns for 2015 need to be aware that the instructions for several IRS tax forms have changed as a result of the phased-in implementation of the Affordable Care Act. (Perhaps it is just coincidental but it is interesting to note that all of the substantial tax changes affecting small business taxes this year relate to ACA). In some cases additional forms need to be added to the business tax return filing. In other cases the rules have changes so that the same numbers and fact pattern as existed in 2014 would now be reported differently for 2015.
Form W2 now includes some health benefits – Some health benefit are required to be reported on Box 12 under code “DD” of the employees W2. Other types of W2 health benefits reporting is optional for 2015. See the chart on the IRS web site for more information. When small business reimburse health expenses directly to employees outside of an insurance plan this is termed a self-insured plan and these plans are the primary target of the government this year. This only applies to businesses with more than one employee and this discussion is not meant to apply to owner/employees of S-corporations who operate under different rules.
Form 1095-B for employer-provided benefits – An informational filing is now required of small businesses that directly pay employees or medical providers for health care expenses outside of an arrangement with a qualified group health insurance plan. These returns and transmittal forms must be filed with the IRS on or before February 28 or by March 31 if filed electronically. Only those self-insured plans that cover the ‘minimal essential benefits’ are affected. This means that a reimbursement plan that covers only ordinary dental expenses, for example, would not be required to file. This also only applies to businesses with more than one employee and this discussion is not meant to apply to owner/employees of S-corporations who operate under different rules.
Form 2828 excise taxes – This is the form used to report health benefits that are not in conformance with ACA market reform requirements. 2015 is the first year that it applies to small businesses. Certain health benefits paid by small employers after June 30 2015 trigger an excise tax under IRC 4980D at a rate of $100 per employee per day. An employee covered by a non-compliant plan all year would trigger a $18,400 excise tax. Obviously the size of these penalties means that abatement procedures will be a big factor for tax preparers. This article does not cover abatement procedures but it is important to note that correction of the underlying deficiency is first required before asking for relief. In other words, it makes no sense to continue the same non-compliant health plan and then attempt to ask for relief from 2015 taxes on the same violation. Likewise, this only applies to businesses with more than one employee and this discussion is not meant to apply to owner/employees of S-corporations who operate under different rules.
Form 8889 Health Savings Account – This is the form used to calculate and report a deduction for a Health Savings Account. The form is not new and has not changed. However, Publication 969 will be updated for 2015 to reflect that individuals who had a Flexible Spending Account (FSA) through their employer that rolled over benefits from 2014 to 2015 are not eligible for a HSA deduction in 2015. This is unfortunate because the HSA deduction is far more valuable than the maximum $500 rollover in the FSA. It appears that most small business FSA plans did adopt this relatively new benefits rollover feature for 2015 plans after the option became available in 2013. This applies to all businesses and affected individuals.
Form 1040, line 61 or Form 1040A; line 38 Individual shared responsibility payment – The amount of the individual shared responsibility payment is effectively doubled for many small business taxpayers in 2015. Instructions for the calculation of this tax are included the instructions for each of these three primary filing forms (note that IRS was careful not to create a separate tax form for the calculation of the payment as this was a political hot button) and see the instructions for Form 8965 if reporting an exemption from the payment requirement. This applies to all businesses and affected individuals but has a high impact within the self-employed sole proprietors and freelancer businesses.
This list is not inclusive of all possible tax form changes for 2015. This list omits changes due merely as a result of inflation adjustments. This article omits citations but references are included in other articles on those blog and at IRS.gov.