Small Business Insurance Alert: Five Health Reform Tax Time Tips

Last week, both Congress and the California legislature gave business some long awaited good news regarding tax reporting, tax relief, and the health reform law. We have put together the following list of the 5 most significant health reform tax related changes to date.

1.  New 1099 Reporting Requirement Eliminated
The biggest news is what you don’t have to do this year. Congress eliminated the onerous new 1099 reporting requirement that would have required businesses to provide 1099’s for all products purchased over $600. President Obama’s signature is expected shortly.

Last July, I attended a meeting in Washington, D.C. called by the White House Director of Health Reform to discuss this provision of the Affordable Care Act. It was clear then that the administration would support repealing this requirement. Ten months later, it has finally been done.

2. No CA Income Tax due on Adult Child’s Health Insurance Premiums
Last week, California’s legislature passed and Governor Brown signed (AB) 36 which exempts employees from paying taxes on employer-paid health insurance for their young adult children’s coverage (until the year they turn 27). This law conforms California income tax law with the federal income tax law provision of the Affordable Care Act.

For information on what employers need to do to correct W-2’s and employees need to do to file for this adjustment, go to the Franchise Tax Board.

3. Self-Employed Receive One Time Tax Benefit
Self-employed individuals may receive the greatest tax benefit this year. They can deduct the amount of their insurance premiums from their adjusted gross income before calculating self-employment tax.

4. Small Business Health Insurance Tax Credit
Remember there are tax credits available to the smallest businesses and not-for-profits with low wage employees to help pay the cost of health insurance. Business owners’ salary is excluded from the calculation. Use the calculator on our website.

5.  W-2 Reporting Requirement for Health Insurance Delayed until 2013
The ACA requirement that the amount a business pays for employer-sponsored health coverage be included on an employee’s W-2 has been postponed for businesses with less than 250 employees. See IRS Notice 2011-28.

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