Health insurance reimbursements and tax penalties for employers

Chad Silver

Chad Silver

Managing Partner of Silver Tax Group, author of the book "Stop the IRS". Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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On behalf of Silver Tax Group posted in Tax Crimes on Thursday, December 22, 2016.

Michigan business owners have understandable concerns regarding health insurance requirements for employees. The reporting requirements are practically endless. And even the failure to follow specific Affordable Care Act requirements can result in tax consequences.

Though not addressed in the ACA, the IRS was fining small businesses up to $100 per day who did not offer health insurance to employees. This appears to be a substantially bigger penalty than larger employers paid. Such a requirement also appears to penalize employers for providing reimbursement for its workers regarding health care costs. This occurs when employers who may not follow all of the group health plan requirements under the ACA nevertheless reimburse employees for health insurance premium costs.

The U.S. Senate recently passed legislation in order to make life easier for such employers. Section 18001 of the 21st Century Cures Act would eliminate this tax penalty on businesses that provide reimbursement to employees – though not necessarily follow every requirement under the ACA. This legislation would allow for small businesses to provide compensation to employees regarding the cost of individual insurance premiums and the costs for medical visits.

The National Federation of Independent Business issued a statement of support. “Both the Senate and the House have now passed critical legislation to protect small business owners from outrageous IRS fines,” stated the NFIB president. And President Obama signed this legislation into law.

It is important to understand that small business owners frequently face potential penalties for actions that would otherwise appear to be perfectly innocent. The tax laws are complex. Also, not all tax penalties are fair. For this reason, it can be good to have on your side skilled tax representation to provide you legal advice and representation when issues arise.

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