Tax aspects of Obamacare implementation: businesses and headcount

It’s been awhile since we devoted a post on this blog to tax issues relating to implementation of the Affordable Care Act (ACA, also known on Obamacare).

As we noted in our December 17 post last year, the IRS is deeply involved in this implementation. This involvement goes well beyond imposing tax penalties on people who do not comply with the individual mandate to buy health insurance.

The IRS is also intimately involved in such Obamacare aspects as tax credits for small businesses to help them provide affordable insurance policies to their employees. The IRS is also responsible for assessing penalties on businesses that do not meet their ACA obligations.

In this post, let’s look at how the IRS is now scrutinizing employer decisions to cut the size of their staff because such decisions could conceivably be motivated by an intention to avoid ACA requirements

Last month, the IRS issued regulations regarding the obligations of businesses with fewer than 100 employees. Businesses of this size will have until 2016 before they are subject to possible tax penalties for failing to provide affordable health care options to their employees.

The ACA had originally called for businesses with more than 50 employees to be required to provide affordable care options beginning this year. The Obama administration has expanded the employee threshold to 100 temporarily, however, and delayed its implementation until 2016.

But the IRS is not folding its ACA-enforcement tent. Under federal regulations, the IRS has asserted the authority to review workforce reductions that put an employer’s headcount below 100. For some employers, this could add to their business tax compliance concerns.

Source: The Business Journals, “Get Ready to explain your personnel decisions to the IRS,” Kent Hoover, March 8, 2014