Donovan, Klimczak & Company CPAs

Patient Protection and Affordable Care Act of 2010 Enacted March 23, 2010

  • Amended by the Health Care and Education Reconciliation Act of 2010, effective March 30, 2010.
  • Imposes nondeductible flat dollar penalty amounts per person who does not carry the minimum essential health coverage starting in 2014. Exempts those below the threshold for filing an income tax return.
  • Additional Medicare payroll tax: An additional .9% on earned income in excess of $200K for individuals and $250K for families. An additional 3.8% on investment income for individuals with AGI in excess of $200K, in excess of $250K for joint filers.
  • Tax on high cost insurance plans: Imposes a 40% nonrefundable excise tax on high-dollar health insurance plans beginning in 2018.
  • Tax credits available to certain small employers that provide health insurance: Dollar for dollar tax reduction for non-elective contributions to purchase health insurance for its employees. The business must offer health insurance and must pay at least half the total premium cost. For a reduced credit, the business can have no more than 25 full-time equivalent employees whose wages average no more than $50,000. For the full credit, the business can have no more than 10 FTEs whose wages average no more than $25,000. The credit is available for any tax year beginning in 2010, 2011, 2012 or 2013. The credit is generally 35% of the employers contributions paid and phases out as the employer size and average wages increase. For years after 2013, the credit increases to 50% and is only available to employers that purchase health coverage through a state exchange and the credit is only available for two years (2014 and 2015).
  • Large employer mandate & penalty: Effective for months beginning after December 31, 2013, large employers (at least 50 full time employees during the preceding year) must offer certain levels of healthcare coverage to its employees.

    For a large employer that fails to offer the minimal essential coverage and has at least one FTE employee enrolled in a state exchange plan where a premium tax credit or cost sharing subsidy is paid to the employee, the penalty is one-twelfth of $2,000 per employee, with the first 30 employees exempted. For a large employer who offers coverage but has at least one FTE employee receiving a premium tax credit or cost sharing subsidy, the penalty is one-twelfth of $3,000 times the number of employees receiving a premium tax credit or cost sharing subsidy.

  • Requirement to offer “free choice vouchers:” After 2013, employers offering minimum essential coverage through an employer-sponsored plan and paying for a portion of that coverage will have to provide qualified employees (those who do not participate in the employer’s health plan) with a voucher whose value could be applied to purchase health insurance though an insurance exchange.

Note: This is not a complete list of all the provisions in the Act. Please give us a call to discuss an item in greater depth or to inquire about an item not on this list.

Disclaimer: This document represents a general overview of recent tax developments and should not be relied upon without an independent, professional analysis of how any of these provisions may apply to your specific situation. Any tax information contained in the body of this narrative was not intended or written to be used, and cannot be used, by the recipient for the purposes of avoiding penalties that may be imposed under the Internal Revenue Code or provisions of applicable state or local law.

If you have any questions regarding this issue please contact us at DKC - Warfield & Company at 330.655.1395. Warfield & Companys CPAs, Ltd. is located at 581 Boston Mills Rd. #100, Hudson, Ohio 44236.

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