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Impact of Affordable Care Act on Small Businesses

The Affordable Care Act (ACA) is adding another layer of complexity to your small business tax planning strategy. New regulations and requirements are making small business tax planning a priority. Becoming familiar with the laws and factoring it into your tax preparation is essential to prevent costly surprises.

Role of the Employer

The purpose of the ACA is to guarantee that all uninsured Americans receive health insurance coverage. To implement this, the ACA has introduced new laws, incentives and penalties which affect small businesses. One regulation in particular that directly impacts on small business tax planning is the Employer Mandate (EM). This law states that certain employers with 50 or more “full-time equivalent” employees (FTEs) may be assessed a penalty. In addition to this, the law requires these employers provide employees with “affordable” health coverage as defined by the law or they will be subject to penalties.

Preparing for Small Business Tax Planning

The fallout for mandatory employee coverage is significant and can negatively impact your cash flow, payroll and tax payments. Being prepared can make a difference.

Here are some tips to help you plan for the changes:

  • If your small business has less than 25 FTEs then find out how to receive tax credits
  • If you are approaching 50 FTEs then create a budget for increased costs
  • Find out which plans are acceptable for FTEs
  • Do your research to learn about all the new reporting requirements in effect this calendar year
  • Work with an insurance broker to find the best policies and plans for your employees

Your Takeaway Tip

Keeping up with the numerous and complex laws, requirements and penalties of the ACA will help your small business prevent costly fines that can hurt your cash flow. Be sure to consult with a tax planning specialist to make sure your business will stay on top of new regulations.

Learn more about the ACA’s impact on your small business tax planning

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photo credit: Obamacare on the steps of the Supreme Court via photopin (license)