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August 1, 2013


Health insurance reform: the IRS and the employer mandate

For better or worse, the Internal Revenue is poised to play a key role in the implementation of the Affordable Care Act (ACA). The tax aspects of the new law will affect businesses and individuals across the country.

Congress passed the landmark health insurance law three years ago. And last year the U.S. Supreme Court upheld its key provisions.

But there was little awareness, at the time the ACA was passed, just how involved the IRS would be in making it operational.

Of course, opposition to the law hasn’t died down completely. Sen. Ted Cruz of Texas is among those still calling for Congress to refuse to fund the law. For now, however, preparations are in full swing for putting in place the insurance “exchanges” where insurance can be purchased by those not covered under an employer’s plan.

Each state will have one of these exchanges. They will be run either by the state itself or by the federal government on behalf of the state. And they are due to open for business on October 1.

Individuals who do not have insurance through work or as dependent on a family member’s plan will be required to purchase insurance on these exchanges. Failure to comply with this so-called individual mandate will result in tax penalties to be collected by the IRS.

Even with this individual mandate, though, the old employer-based system still remains largely in place. In fact, in some ways it is strengthened. This is because, under the ACA, employers who have 50 or more full-time employees must offer those employees affordable health coverage.

There are various federal tax credits available to employers to assist with this. But employers who fail to offer affordable coverage. But businesses who fail to comply will face substantial fines under the new law.

The Obama administration recently postponed implementation of this employer mandate from 2014 to 2015. This delay will cost the U.S. Treasury a considerable sum in uncollected fine revenue. But it came as a relief to many small businesses.

Source: Huffington Post, “”Health Care Law: Delay of Employer Penalties Will Cost Gov’t $10 Billion” Ricardo Alonso-Zaldivar, July 30, 2013