This week the IRS released “Notice 2015-17” addressing the concerns of business owners who wished not to provide insurance to their employees under a sponsored plan. Usually these companies would offer to reimburse employees who went out and purchased their own plan, or who purchased additional coverage under a spouse’s health insurance through the spouse’s employer.
A little known portion of the Affordable Health Care Act (Section 4980D) had specified IRS tax penalties for those employers of $36,500 per employee. Before you panic, the IRS released the notice to inform employers with less than 50 full time employees would not be subject to the penalty for 2014, and for the first half of 2015 (through June 30). If you are an S Corporation the IRS will not apply the penalty to anyone with more than 2% interest in the S Corporation “until further guidance is issued.” LLCs or Corporations with only one employee will not be subject to the penalty.
Changing the nature of the reimbursement from a “non-taxable” to a “taxable” status will not relieve the employer of the penalties under Section 4980D. If you are a San Diego LLC or corporation and have reimbursed employees in place of providing a healthcare insurance plan you should contact us immediately for a free consultation at 866-631-3470 to discuss the taxable ramifications of the Affordable Heath Care Act and to minimize or avoid the penalties of section 4980D.
