Health Care Coverage:
As many of you know, there have been major changes in the laws for providing health care coverage to employees. These laws are being implemented under Internal Revenue Code Section 4980H which most people know as the Affordable Care Act or ACA. The laws vary depending on how many full-time employees a company has or part-time employees whose hours add up to that of a full-time employee (full-time equivalent employee). An employee is considered full-time for the ACA for a specific month when the hours worked average 30 hours per week or total 130 hours in that month. There are different requirements for coverage and for reporting what coverage is provided to employees. And the reporting requirements start in 2016!
Employers who have less than 50 full-time or full-time equivalent employees are generally not subject to these rules. One exception is where a self-insured plan is offered by the employer. Another exception is for affiliated companies. Small employers may be entitled to a credit for paying health insurance premiums for a policy obtained through an exchange and who cover 50% of the health care costs and have less than 25 full-time equivalent employees with average wages of less than $50,000 per year.
Employers who have 50 or more full-time or full-time equivalent employees are considered Applicable Large Employers or ALEs and are subject to the employer shared responsibility provisions under the ACA. This is based on the 2014 year. An exception to this rule is for seasonal workers who cause employers to reach 50 or more for 120 days or less during the year. ALEs must provide coverage to 95% of their full-time employees and their dependents but not their spouses. That coverage must be considered affordable and provide minimum value or employers are subject to a penalty. The coverage is considered affordable if it would cost 9.5% or less of employees' annual household income. Since this is difficult to calculate there are safe harbors available which include the employees' Form W-2 wages, rates of pay and the federal poverty line. Coverage provides minimum value if it covers at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan. There is a minimum value calculator on the IRS website at irs.gov.
Health insurance providers are required to file Forms 1095-B to all your employees they insure. Employers are required to file these forms if they are sponsors of self-insured plans and are not considered ALEs. Unions will generally be issuing these forms for their members.
All ALEs (50 or more full-time or full-time equivalent employees) must file Forms 1095-C for each employee who was full-time during any calendar month of the year. Forms 1095-B and 1095-C are due to the employees by January 31, 2016 for the 2015 year and to the IRS by February 28, 2016 with transmittal Form 1094-B or 1094-C, respectively. If filing 250 or more forms, they must be filed electronically by March 31, 2016. A 30-day automatic extension is available by filing Form 8809.
IRS will bill ALEs for employer shared responsibility payments due. These payments can be calculated in two ways. If affordable minimum essential coverage is not offered to 95% of eligible full-time employees and their dependents and an employee gets a reduced premium or premium tax credit from an exchange, then the payment is $2,000 for each full-time employee prorated on a monthly basis, with the first 30 employees excluded from the calculation. If the required coverage is offered but an employee is one of the exceptions where the coverage was not affordable, did not meet the minimum value or was in the 5% who was not offered the coverage, the payment is $3,000 per full-time employee who received a premium tax credit, prorated on a monthly basis. Employers who offer self-insured plans are also required to file Form 720 by July 31st of each year and pay the annual fee to help fund the Patient-Centered Outcomes Research Institute.
Certain transition rules apply for the 2015 year which may reduce your reporting requirements or required payments. In determining if you are an ALE and your required payment for 2015, under 100 employees may be substituted for 50 if the total workforce and its hours and benefits remained basically unchanged from 2014, you may use any 6-month consecutive period in 2014 instead of the entire year to calculate full-time employees, you may also use the number of hours employees worked in the prior year during a 6-month period starting no later than 7/1/14 and ending no earlier than 90 days before the start of the 2015 plan year to determine full-time employees, months in 2015 which are part of a fiscal plan year may be eligible to be excluded, coverage before the first pay period in 2015 may not be considered, employers may not be penalized if they take appropriate steps to offer minimum essential coverage to dependents in the future and not drop current dependent coverage, minimum essential coverage may be offered to 70% instead of 90% of full-time employees and their dependents and the calculation of the payment if proper coverage is not offered to employees may be made by an ALE with 100 or more employees by excluding 80 employees instead of 30.
In addition, ACA regulations provide that employers contributing to multi-employer plans such as through unions state that those employers will be considered as having met their obligations to offer health coverage for full-time employees if the employer is required to contribute to a plan that provides the appropriate coverage. Simplified reporting for 2015 allows the employer to complete Forms 1095-C by using Code 2E on Line 16 and then Code 1H on Line 14.
Employers issuing 250 or more Forms W-2 must continue to report the cost of health insurance coverage in Box 12 using Code DD and file the forms electronically.
Your benefits provider and payroll service should have already advised you of the filing requirements and may provide the service of completing the forms for you or assisting you with them.
Please make sure to add all year-end adjustments to employees' salaries before the end of the year. This should include all bonuses, auto allowances, personal use of company autos and any taxable insurance coverage. For shareholders of S Corporations who own more than 2% of the company, medical insurance coverage, personally owned life and disability insurance premiums and personal use of autos must be added back.
The FICA and Medicare taxes rates will remain the same, with the maximum wages subject to FICA also remaining the same at $118,500. The Federal unemployment rate and wage base will also remain the same.
New York City Paid Sick Time:
New York City had previously sent out letters to all employers who do business in New York City informing them that they are required to give their employees working in New York City at least 5 days paid sick time per year. The law applies to employers who employ 5 or more employees for more than 80 hours per year for each employee and it applies to all employees working in NYC. Notice of this policy should have been given to existing NYC employees and needs to be given to new hires. The notice should mention the policy of accrual and use of sick leave, the employer's calendar year, the right to be free from retaliation for using the days and the right to file a complaint. Sick leave accrues at the rate of 1 hour for every 30 hours worked and includes union employees covered by union contracts entered into subsequent to April 1, 2014.
New York City Commuter Benefits Law:
New York City has passed a law effective January 1, 2016 which requires employers with 20 or more full-time non-union employees in NYC to offer pre-tax commuter benefits. A full-time employee is one who worked an average of 30 hours or more per week in the most recent four weeks, any portion of which was in NYC. The benefit must be offered within 4 weeks of hiring a new employee. Union, part-time, temporary and seasonal employees are exempt, as well as employees not working in NYC even if they live in NYC. Parking expenses are not covered. The IRS currently allows a pre-tax deduction of up to $130 per month for qualified transportation costs. Employers must keep records of having offered the benefit to eligible employees and proof if it was declined by using the form at nyc.gov/commuter benefits. Penalties for not offering the benefit may be assessed starting July 1, 2016 however an employer will be given 90 days to correct a violation before being assessed a penalty.
Other Tax Matters to Consider
New York State has been increasing their audits over the past few years, especially of contractors. Most companies should be registered to collect sales tax, especially contractors. Please make sure that you charge sales tax on all repair jobs. In that case you do not have to pay sales tax when purchasing materials for the job but you still do have to pay the tax on the supplies. You do not charge sales tax on capital improvement jobs, but then you must pay sales tax on all purchases of materials and supplies. If the tax due is not paid to vendors, then the tax must be paid with the filing of your sales tax return in addition to any sales tax charged to customers. You should not be issuing an invoice to a customer without charging them the tax unless you have an exemption form or capital improvement certificate from them to not charge them the tax. You would be responsible for all tax not collected. You cannot legally issue an exemption certificate to not pay sales tax to a vendor if you are not registered to collect sales tax. A credit or refund is available for sales tax paid to vendors that was not required to be paid for jobs subject to sales tax or tax exempt jobs.
Corporate Estimated Tax:
Please make all 4th quarter corporate estimated tax payments by December 15, 2015 for calendar year companies or on their due date for fiscal year companies as we have advised you to do to avoid underpayment of estimated tax penalties.
Highway Use Tax:
New York State requires all trucks with a gross vehicle weight in excess of 18,500 pounds to register for New York State Highway Use Tax. In addition, the IRS requires all trucks with a gross vehicle weight in excess of 55,000 pounds to register for Federal Heavy Highway Use Tax. New York State will no longer register vehicles without the NYS Highway Use tax returns and the Federal Heavy Highway Use tax return, if applicable, being filed and the tax due being paid.
If you have any questions or need our assistance with any of the above tax filing requirements, please contact Robert Schaffer, Tax Manager or your Castellano, Korenberg & Co. tax professional.