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Tax Advisory: A New Form Letter from the IRS to Employers

By Denise Felber, HoganTaylor Tax Partner

On June 21, 2016, the Department of Health and Human Services issued a letter to a client.  The client owns a business with less than 50 employees and does not offer medical insurance.  Since the employee count is less than 50, the employer is not required to provide medical insurance and is not subject to employer mandate penalties.

This notice stated the employee reported that they:

  • Did not receive an offer of health care coverage,
  • Coverage was offered but it was not affordable or provide minimum value, or
  • Were not able to enroll due to a waiting period.

The notice stated the employee received financial assistance in the purchase of insurance from the marketplace.  It also provided:

  • The employee’s name
  • Birthdate and
  • Last four digits of their social security number.

To receive financial assistance, the employee’s income must be below a certain amount, they are not covered for medical expenses through another government program, and they were not offered affordable insurance from their employer.

The notice allows the employer to protest the information about the employment status of the employee or the statements regarding the employer provided insurance.  Since the employer is not a “large” employer with 50 or more employees, they were not required to respond to the notice.

For employers with more than 50 employees, this notice requires review by human resources.  If the employee should not receive the credit, the employer should provide information contained in the preparation of the Form 1095 filings to prevent a subsequent penalty assessment, including:

  • Coverage cost of a single employee,
  • Employment status of the employee (full or part time) by month, and
  • The employee’s salary

If you would like to discuss the penalty provisions and the information you should maintain, please contact us.