What to Expect When Filing This Year for the Affordable Care Act
The year is coming to a close, but year-end reporting season is just getting started.
Now is the time for businesses to start preparing for tax reporting and identifying how they may be affected by recent tax changes. Of course, even for those who live and breathe the reporting business, keeping monotonous tax details straight is a tough and trying task and takes your focus off of the everyday business.
Additionally, 2015 marks the first year businesses must file 1095 forms to comply with Affordable Care Act (ACA) filing requirements. Depending on the size of your business, reporting requirements and forms may vary. To get ahead of the chaotic tax reporting season and the new ACA rules, Greatland Corporation has gathered important information to help businesses understand what to expect when filing this year.
As always, businesses will need to file the standard tax forms when reporting employee financial figures. 1099s and W-2s are two different tax forms used for two types of workers. Independent contractors receive 1099 forms and traditional employees will receive a W-2 every year. Below is additional background to help businesses decide how to classify workers:
A W-2 is the form employers will use to report yearly wage and withholding information. An employer needs to provide this form to employees no later than February 1, 2016. Employees will receive four copies of this form to report federal, state and local income and maintain a copy for their own records.
A 1099-MISC is the form used to report miscellaneous income, such as income earned as a contractor or freelance worker, as well as fees, royalties, commissions and rental income. If you are a business that uses contractors or freelance workers who received at least $600 during the year, you must provide them with a 1099-MISC form to report this income. An employer needs to provide this form no later than February 1, 2016.
The Affordable Care Act, or Obamacare, requires many employers to offer health insurance coverage to full-time employees and their dependents. The Internal Revenue Service developed Form 1095-C for employers to report the value of that coverage to employees and to the IRS. If a company has at least 50 full-time workers or FTEs, they must file a 1095-C on behalf of their employees, even for employees who declined to participate in their employer’s health plan.
It is important to note that all self-insured employers, regardless of size, must report healthcare coverage information to employees and the IRS. Full-time employees are defined as those who worked an average of 30 hours or more per week for more than 120 days in the last year. Using this guideline, businesses may discover that they have less than 50 full-time employees, yet still meet the requirements for ACA reporting. Healthcare.gov can act as a helpful resource and has tools such as a full-time equivalent employee calculator to help determine your filing status.
Gathering information necessary to complete Form 1095-C – required for employers with 50 or more full-time employees – presents a unique challenge to companies since the form requires data typically stored in the employer’s payroll system as well as HIPAA-protected benefits information that is most often included in the employer’s human resources software. The prospect of correctly combining this information from two very different regulated databases and importing the data into the unfamiliar 1095-C form is understandably causing stress. Businesses can expect additional workload this year in gathering the data required by ACA.
In response to the high level of interest, questions and concerns Greatland has heard from small- to mid-sized businesses about the new reporting requirement, the leading tax form company has launched an early release of its Yearli Performance software to offer businesses the opportunity to prepare for filing the new Forms 1095-C. The early release of this software will enable customers to preview the layout and functionality, and also import data or begin entering data for employees. Given the high volume of information required for 1095–C reporting, transferring and seamlessly importing the data will ease this process for employers and help avoid the need to manually input individual employee records.
Providing 1095 forms became mandatory starting in the 2015 tax year and employers must send the forms not only to their eligible employees but also to the IRS in order to remain in compliance with ACA reporting requirements. Employers with 250 or more forms must file them electronically. Incorrect filings will not be penalized for calendar year 2015 filing (reported in 2016) if employers/insurers file on time and make a good faith effort to comply.