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August 15, 2013

 There are many changes coming to employers in 2014 with the Affordable Care Act (ACA), primarily for employers who have 50 or more full time employees. But did you know that you may have 50 full-time employees and not even realize it?


One of the most prominent changes facing us in 2014 is the change to the calendar hours that make up full-time equivalent employees, which has been reworked to a lower level of hours from previously used standards.  If you are not familiar with these changes you may want to contact us via our website at www.morganscpas.com. There are many steps used to assist you in calculating the number of full-time Employees in your facility to determine whether you are an employer that is applicable under the “large employer” category for ACA guidelines. The IRS is considering possible alternatives to this method but nothing has yet been announced.    


Just as you thought you may have it under control you may want to reassess how you are classifying your independent contractors(IC’s) for the purposes of ACA. “Large Employers” (as defined by the ACH) consisting of 50 full-time Employees or full-time employee equivalents;  whom misclassify workers and therefore fail to offer those misclassified workers minimum essential coverage, will be subjected to additional penalties under the ACA.


As it stands under current rules, an employer with fewer than 50 full-time employees may still be classified as a “large employer” if the IRS determines that existing IC’s have been misclassified and by reclassification push the employer over the 50-employee threshold.


As well as the standard penalties for misclassification of workers, the additional penalties will now include:


1)      “Insufficient Coverage” penalties of up to $3,000.00 per year for each

  misclassified full-time worker (additional details apply)


2)       “Failure to Offer” penalties of $2,000.00 per year multiplied by the total number

   of full-time employees if misclassifications results in failure to offer coverage

   (additional details apply)


Proposed IRS regulations imply that the common law test for employment status will be used in determining whether the workers qualify as “employees” under the ACA. There are a variety of factors that are examined which ultimately results in how much control the employer has over the worker.


Of course many organizations have stepped forward recommending that the IRS exclude employees who are statutorily treated as IC’s under Section 530 of the Revenue Act of 1978 which allows the company to treat a worker as an IC for employment tax purposes as long as there is reasonable basis for this sort of treatment and it is consistent.

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