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Reimbursed Health Premiums
Employer Health Care Arrangements
There have been many changes to the healthcare laws that are important to both employees and employers to know and understand. One change that started in 2014 deals with employers reimbursing employees for their health insurance premiums. It may be less expensive for an employer to reimburse employee paid insurance premiums rather than establish its own insurance plan. This practice has been followed for many years by small employers, however, it has recently been determined under the new healthcare laws that employers can no longer have an arrangement under which an employee may have an after‑tax payment amount applied toward health insurance coverage or take that amount in cash compensation. In other words, an employer may not reimburse its employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace) in a tax-free manner. If these arrangements are continued, they may be subject to a $100/day excise tax per applicable employee. We strongly suggest that you take a look at the employee medical insurance program that you have in place in your company and determine if changes will need to be made. If you have further questions or would like suggestions on changes that can be made, please contact our office.
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Healthcare Checkup
Changes in income or family size may affect the amount of the premium tax credit a taxpayer is entitled to receive. Therefore, now is a good time for taxpayers who are receiving an advance credit to do a midyear premium tax credit checkup to see if an adjustment to the credit is needed. According to the IRS, taxpayers should report changes to their Marketplace as they occur. Changes in circumstances that should be reported include: an increase or decrease in income, marriage or divorce, the birth or adoption of a child, starting a job with health insurance, gaining or losing eligibility for other health care coverage, and changing residences. Reporting the changes will help taxpayers avoid getting too much or too little advance payment of the premium tax credit. The IRS warned, "Getting too much means you may owe additional money or get a smaller refund when you file your taxes. Getting too little could mean missing out on premium assistance to reduce your monthly premiums."
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New Forms to be Issued
The calculation mentioned above regarding the healthcare insurance premium tax credit will be performed and reported on all 2014 individual income tax returns. The exchanges will issue Form 1095-A at the end of the year which will report the names of all family members covered, the amount of monthly premiums and the advance credit payments applied toward their coverage. Even those individuals who may not have a tax return filing requirement, are now required to file an individual income tax return if the taxpayer and/or their dependent family members have received the premium tax credit.
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