Tag Archives: IRS

2018 HSA IRS Plan Maximums

The IRS recently released Revenue Procedure 2017-37, which provides information on the limits for Health Savings Accounts (HSAs) for 2018. The annual contribution limitation on deductions for individuals with self-only coverage under a high deductible health plan will be $3,450. The deduction limitation for an individual with family coverage will be $6,900.

Please note, these limits reflect current law. Under the American Health Care Act (AHCA), passed by the House of Representatives earlier this month, the contribution limit rises to the statutory out-of-pocket maximum  ($6,650/$13,300) beginning in 2018. The AHCA is not yet a law. We will provide modified contribution limits if legislation subsequently changes the current 2018 limits.

Minimum Deductible for HDHP: In order for a health insurance plan to be considered a “High Deductible Health Plan” for 2018, the deductible must be at least $1,350 for self-only coverage and $2,700 for family coverage.

Maximum Out-of-Pocket: Out-of-pocket expenses may not exceed $6,650 for self-only coverage and $13,300 for family coverage.

These changes will go into effect for calendar year 2018.

**Please note that these limits are subject to change.  The American Health Care Act, if passed, includes changes related to Health Savings Account Limits.

Health Savings Account (HSA)- New Annual Maximums 

Coverage Level 2017 2018
HSA Contribution Individual $3,400 $3,450
Amounts Family $6,750 $6,900
>55 Catch-up $1,000 $1,000
Min HDHP Individual $1,300 $1,350
Deductible Amounts Family $2,600 $2,700
Max Out of Pocket Individual $6,550 $6,650
HDHP Amounts Family $13,100 $13,300

IRS Ruling Considered An Obstacle To ACOs

A ruling by the Internal Revenue Service creates a significant obstacle to a new type of health care network that the Obama administration has promoted as a way to provide better care at lower cost, industry lawyers and providers say.

Health care markets are rapidly changing as independent doctors and hospitals race to form networks, known as accountable care organizations, in which they coordinate care for patients. The doctors and hospitals have financial incentives to keep patients healthy and to control costs, and they can share in the savings if they meet performance goals.

The new entities, which now cover more than 28 million people, according to Leavitt Partners, a health care consulting firm, help manage care for Medicare beneficiaries, for people with employer-sponsored insurance and for consumers who buy coverage through online marketplaces under the Affordable Care Act.

In its recent ruling, the I.R.S. denied a tax exemption sought by an accountable care organization that coordinates care for people with commercial insurance. The tax agency said the organization did not meet the test for tax-exempt status because it was not operated exclusively for charitable purposes and it provided private benefits to some doctors in its network.

To read the full story, click here.


Keep your Health Insurance Documents with Your Tax Records

Gathering documents and keeping well-organized records make it easier to prepare a tax return. They can also help provide answers if the IRS needs to follow-up with you for more information.

This year marks the first time that you may receive information forms about health insurance coverage.

The information forms are:

You do not need to send these forms to IRS as proof of your health coverage. However, you should keep any documentation with your other tax records. This includes records of your family’s employer-provided coverage, premiums paid, and type of coverage. You should keep these – as you do other tax records – generally for three years after you file your tax return.

To read the full story, click here.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary

Final Versions of IRS Sections 6055 & 6056 Released

The Internal Revenue Service recently released final versions of forms and related instructions that employers may use to report under Sections 6055 and 6056 for 2014. These forms are not required to be filed for 2014, but reporting entities may voluntarily file them in 2015 for 2014 coverage.

The forms for 2015 must be filed by February 28 (or March 31, if filed electronically). Form 1095-B or 1095-C must be provided to applicable full-time employees by January 31.

Section 6055 Reporting

Under Section 6055, every entity that provides minimum essential coverage (MEC) to an individual during a calendar year must file Forms 1094-B and 1095-B, including:

  • Health insurance issuers or carriers;
  • Self-insured health plan sponsors;
  • Government agencies that administer government-sponsored health insurance programs; and
  • Any other entity that provides MEC.

For small employers purchasing a fully insured product, the sponsoring insurance carrier is responsible for this particular filing.

Self-insured plan sponsors that are also applicable large employers (ALE) subject to the employer shared responsibility rules will report information about the coverage in Part III of Form 1095-C, instead of on Form 1095-B.

Applicable Large Employers

According to the IRS, applicable large employers that are subject to the employer shared responsibility provisions under section 4980H are required to report under Section 6056. An ALE is defined as an employer that employed an average of at least 50 full-time employees on business days during the preceding calendar year.

A full-time employee generally includes any employee who was employed on average at least 30 hours of service per week and any full-time equivalents. For example, 40 full-time employees employed 30 or more hours per week on average plus 20 employees employed 15 hours per week on average are equivalent to 50 full-time employees.

Employers that are not subject to the employer shared responsibility provisions of Section 4980H are not required to report under Section 6056. Consequently, employers that employed fewer than 50 full-time employees (including full-time equivalents) during the prior year are not subject to the reporting requirements. The IRS notes that any employer that sponsors a self-insured health plan is required to report under section 6055, even if the employer has fewer than 50 full-time employees.

Questions and answers on reporting can be found on the IRS website for both Section 6055 and Section 6056. Additional information can also be found in the IRS’ publication, “Affordable Care Act: Reporting Requirements for Applicable Large Employers,” by clicking here.

Section 6056 Reporting

All ALEs must file Form 1094-C and Form 1095-C for each full-time employee. These forms help the IRS determine whether an ALE owes penalties under the employer shared responsibility rules (“pay or play” rules), as well as whether an employee is eligible for premium tax credits.

Form 1095-C will generally be used by ALEs to satisfy both the Section 6055 and 6056 reporting requirements, as applicable.

  • An ALE that sponsors a self-insured plan will complete all sections of Form 1095-C to report the information required under both Sections 6055 and 6056. Therefore, these ALEs will be able to use a single form to report information regarding whether an employee was covered.
  • An ALE that provides insured coverage will also report on Form 1095-C, but will complete only the sections of Form 1095-C related to Section 6056.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary

Small Business Tasked to Tally Employee’s Health-Care Costs

Small employers are facing an unexpectedly onerous task: tallying their individual employees’ monthly health-care costs.

Starting in 2016, under the Affordable Care Act, employers with 50 or more full-time workers are required to file new tax forms laying out what individual employees are being charged for their employer-sponsored plans. The Internal Revenue Service released the new forms on Feb. 8.

Though completed forms aren’t due until next January, many employers are scrambling to get procedures in place now to collect the data. The new process entails measuring every individual full-time worker’s total monthly out-of-pocket cost for an employer health plan this year.

The IRS says tax officials will use this information to figure out whether employers are complying with the law’s requirement that businesses offer affordable health coverage to full-time employees and their dependents. Federal penalties for failing to provide an affordable health plan can run up to $3,000 an employee.

But small employers, especially those who keep their own books and prepare their own tax returns, say they’re finding the task of tracking employee costs for the plans to be confusing and time-consuming.

Rather than simply ask employers to record the price tag for a given health plan, the forms require employers to calculate the lowest-cost plan available to each full-time worker on a month-by-month basis—a figure that can vary as wages or working hours change, tax lawyers and workplace benefits consultants say.

That can be especially hard for retailers, restaurants, day-care services or other businesses where workers’ hours can vary from part-time to full-time, or so-called variable hour employees, they add. Under the law, employers aren’t required to offer coverage to part-timers.

“It’s a labor intensive process,” says Adam Okun, a senior vice president of Frenkel Benefits in New York, about completing the new IRS paperwork, Form 1095C. Employers who don’t start collecting this information today are heading for a “real nightmare next year,” he adds.

To read more, click here.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary

Fringe Benefits and Same-Sex Marriages

Special Updates: Same-sex couples, legally married in jurisdictions that recognize their marriages,will be treated as married for all federal tax purposes (including employee benefits). More specific IRS guidance includes: 

Agency guidance released by the U.S. Treasury Department and the IRS addresses the recognition of same-same marriage in the wake of the U.S. Supreme Court ruling that invalidated part of the Defense of Marriage Act (DOMA), which defined “spouse” as a person of the opposite sex who is a husband or wife for purposes of federal law.

  • Same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for all federal tax purposes (including employee benefits), according toRevenue Ruling 2013-17.
  • The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage. The ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.
  • An employee who purchased same-sex spouse health coverage under his or her employer’s plan on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income, and may be able to claim a refund of income taxes paid on the premiums by filing an amended return.
    • Procedures for correcting overpayments related to payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses are available in IRS Notice 2013-61 
  • Special Note: The IRS has issued a set of questions and answers, effective December 16, 2013, regarding the participation by same-sex spouses in cafeteria plans, health savings accounts (HSAs), and health flexible spending arrangements (FSAs). Subsequent Q&As clarify how the ruling affects qualified retirement plans.

Updated FAQs for same-sex spouses and FAQs for other same-sex couples are available from the IRS. For guidance on same-sex marriage laws specific to your state, visit our State Laws section, click on your state, and select “Same-Sex Relationships” from the left-hand navigation menu.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary

New IRS Form for Third-Party Sick Pay Recap

Employers should note that a new IRS Form replaces the “Third-Party Sick Pay Recap” previously reported on Form W-2, Wage and Tax Statement. For wages paid in 2014, new Form 8922, Third-Party Sick Pay Recap, is used to reconcile employment tax returns with Forms W-2 when third-party sick pay is paid.

Third-party sick pay is sick pay that is paid to an employee by some person (the third party) other than the employer for whom services are normally performed. The Internal Revenue Code provides that any third party that pays sick pay that is included in wages must be treated as the employer for purposes of FICA and FUTA with respect to such wages (except as provided in the regulations).

A third-party payer of sick pay can be either an agent of the employer or a third party that is not an agent of the employer. In general, a third-party payer is an employer’s agent if the third party bears no insurance risk and is reimbursed on a cost-plus-fee basis for payment of sick pay and similar amounts.

Liability for FICA, FUTA, and Income Tax Withholding on Sick Pay
If sick pay is paid by the employer of the employee, the employer is liable for withholding and payment of employee FICA tax and federal income tax withholding from the sick pay that is wages, and the employer is also liable for the payment of employer FICA tax and FUTA tax with respect to the sick pay.

Where a third party makes payments of sick pay as the employer’s agent, the employer remains liable for the FICA tax, FUTA tax, and income tax withholding on the sick pay (unless otherwise agreed).

A third party that makes payments of sick pay other than as an agent of the employer is liable for federal income tax withholding (if requested by the employee), and the employee FICA tax with respect to the sick pay. The third party is also liable for the employer FICA tax and FUTA tax, unless the third party transfers this liability to the employer.

New Form 8922
Form 8922 must be used for filing “third-party sick pay recaps” to reconcile the reporting of sick pay paid by a third party on behalf of employers to employees in situations in which the liability for FICA taxes on the sick pay is split between the employer and the third party under applicable regulations.

Whether the employer or the third party is required to file the Form 8922 depends on which entity is filing Form W–2 with respect to the sick pay. An employer is required to file Form 8922 when the third party is liable for the employee FICA tax and income tax withholding, the liability for the employer FICA tax has been transferred to the employer, and the employer and third party have entered into an agreement to have the third party act as the employer’s agent for reporting on Forms W–2.

Form 8922 must be filed by March 2, 2015. Click here for more rules and requirements concerning third-party sick pay.

Our section on Employer Tax Laws provides important information for employers on employment taxes.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary

IRS Delays Penalties for Small Business Offering HRAs

One of these days, employers will experience the full effects of Obamacare — but not yet.

In the latest in a long string of delays in enforcing the rules under the health care overhaul, the Internal Revenue Service and Treasury Department announced on Wednesday that they will wait until summer to start enforcing financial penalties on small businesses that provide so-called Health Reimbursement Arrangements to their employees.

Under HRAs, employers provide spending accounts that their workers can use to cover a portion of the cost of buying individual health plans. The arrangements, which give employers a tax-free means to help pay for their workers’ health costs, do not comply with insurance standards in the Affordable Care Act, commonly known as Obamacare, according to Treasury guidance issued in the fall of 2013. Consequently, employers who elect to continue offering HRAs could be fined as much as $100 per day per employee.

In a public notice, IRS and Treasury officials announced that those penalties (in the form of excise taxes) will not be levied against noncompliant small businesses until July, giving many employers a little extra time to adjust to the new rules.

“The Departments understand that some employers that had been offering health coverage through an employer payment plan may need additional time to obtain group health coverage or adopt a suitable alternative,” the notice reads. Officials also hinted at the fact that the new online health insurance exchanges set up under the law, which were meant to give small businesses more choices and more affordable health insurance options, haven’t quite delivered.

“The market is still transitioning and the transition by eligible employers to SHOP Marketplace coverage or other alternatives will take time,” they wrote.

To read more, click here.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary

Did You Forgo Health Insurance, You May Receive a Tax Penalty

If you decided to skip health insurance this year, consider this: Unless you can prove you have a valid excuse, you will be liable for a penalty during the coming tax season — and the time to start making your case is now.

That’s not all. People who bought subsidized insurance through one of the marketplaces may have new tax forms to complete, while paying the penalty itself may demand some serious number-crunching.

The Internal Revenue Service is gearing up to answer questions, but it warns that only half of the callers may get through — and those who succeed may have to wait a half-hour or more.

“There are quite a number of moving parts that taxpayers have not had to deal with,” said Kristin Esposito, technical tax manager for the American Institute of Certified Public Accountants.

The Obama administration’s Affordable Care Act — including its penalty provision — is in effect for the first time this year and will be reconciled through a person’s tax return.

For most taxpayers, this will simply mean checking a box on a tax return indicating they had insurance for the full year. But millions of others will have to grapple with new tax forms and calculations that may generate unexpected results.

To read more, click here.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary