The Affordable Care Act, enacted on March 23, 2012, contains provisions that are phased in over several years. Some of these may impact your business and/or your employees. We want to help ensure that you are fully informed so that you can make proper decisions on reporting, and take advantage of any credits or rebates for which you might be eligible.
Effective for tax year 2012, many employers were required to report the cost of employer sponsored health care on each employee’s W2 form in Box 12 using code DD. Employers that reported less than 250 W2s for tax year 2011 were granted relief from this requirement until the IRS issues final guidance for this reporting requirement. Click here for more information on this requirement: http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage
Should you choose to report this benefit in 2013, whether required or not, simply inform your Payroll Specialist of the need to report Employer Sponsored Health Care Cost and we’ll set up the code for you. You may then report the amounts via your normal payroll input method and they will automatically appear on your W2s with the appropriate coding.
Small Business Tax Credit
Small businesses that provide group health coverage to their employees, and that contribute an appropriate amount toward that coverage, are eligible for a federal tax credit of up to 35% of the company’s contribution to employee health plans. The amount of the credit will vary based on the number of employees and their average annual salaries. Click here for more details on this credit from IRS: http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers . While we cannot determine the amount of credit for which you may be eligible, our standard payroll reports will be useful to your tax preparer when calculating the credit.
Medicare Changes for 2013
There is an additional Medicare Tax to be withheld from employees who earn more than $200,000 in taxable wages in 2013. The rate for wages up to $200K remains at 1.45%, while the rate for wages in excess of $200K will be 2.35%. The rate for employers remains constant at 1.45% on all taxable wages. Our platform has been updated to account for the higher rate when employees breach the $200K threshold in Medicare earnings.
Medical FSA Contribution Limits
In previous years, employers were able to determine the maximum amount that employees could contribute to Medical FSA’s. For tax year 2013, IRS has mandated a limit of $2,500 per employee on Medical FSA’s. The Dependent Care FSA limit remains at $5,000. The Ovation platform will automatically stop deductions coded as FSA Medical when an employee reaches the new annual limit.
While this certainly does not represent the entirety of the Affordable Care Act, these are portions of the act that affect a wide number of employers and may be important for you to review as a business owner.