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Affordable Health Care and Taxes

(October 2012) posted on Wed Nov 07, 2012

What every print service provider needs to know: the employer mandate, the individual mandate, the exchanges, and much more.

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By Mark E. Battersby

Whether you agree with the decision or not, the US Supreme Court has ruled and the “Affordable Care Act” (ACA) is now the law of the land – and the Tax Code. Soon, every individual must have health insurance or face a tax penalty. Print service providers and other businesses must offer their employees health insurance or face penalties.

Not quite hitting home as of yet is the full impact the ACA’s 20-plus tax adjustments will have, not only on print providers, but on all businesses, their owners, the self-employed, and every individual. Some of the new taxes and credits are already in play.

The employer mandate
The tax most likely to affect print shops – at least those with more than 50 employees – is the “employer mandate.” Under ACA, businesses with more than 50 employees are required to provide employees with health insurance or face an “assessable payment.” That means a business must be in compliance or face the fine beginning after December 31, 2013.

Already on the books is the “Small Employer Health Insurance Tax Credit.” Employers with fewer than 25 employees can enjoy a tax credit (a direct reduction of the tax bill, as opposed to a deduction that reduces the income upon which the tax bill is computed) of as much as 35 percent of the health-insurance premiums they pay for employees.

To take advantage of this credit, however, the average annual wages of a shop’s fulltime (“fulltime-equivalent”) employees must be less than $50,000. And, it’s important to note that only those digital print operations that have fewer than 10 fulltime-equivalent employees and average salaries of $25,000 or less are eligible for the full credit. That full credit is 35 percent of the employer’s contribution toward an employee's insurance premium. As the size of the business and the average wage amount goes up, though, the tax credit goes down. Once the business hits 25 fulltime-equivalent employees or $50,000 in average salaries, the credit is completely phased out.
This tax credit is scheduled to increase to 50 percent for small-business employers after 2013. After 2013, small-business employers will be required to participate in an insurance exchange in order to claim the credit.