WHAT SIZE IS YOUR COMPANY AND WHY IT MATTERS WHEN IT COMES TO HEALTH INSURANCE?

It is important that employers make sure they are aware of the distinction between a small employer and a large employer when it comes to the health care laws and other tax provisions. According to the Affordable Care Act (“ACA”), companies that have 50 or more full-time or full-time equivalent employees are considered Applicable Large Employers (“ALEs”). As an ALE, companies are subject to the employer shared responsibility provision, which requires employers to offer minimum essential coverage that is “affordable” and provides “minimum value” to their full-time employees and their dependents, or face a possible penalty by the IRS. Along with offering health coverage that meets ACA requirements, ALEs are responsible for furnishing Form 1095-C to employees and e-filing these forms with the IRS.  Form 1095-C, which is entitled, “Employer-Provided Health Insurance Offer and Coverage,” indicates the months employees were offered affordable, minimum value health insurance during the year.  ALEs are also required to file Form 1094-C, “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns,” with the IRS. The reporting requirement is necessary to determine if an employee is eligible to claim the Premium Tax Credit, offered pursuant to the ACA, for any months during the calendar year.   

To determine if your company is an ALE for the current tax reporting year, an employer would add its total number of full-time employees (someone who works 30 or more hours a week) for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divide that total number by 12. Full-time equivalent employees are calculated by adding all the part-time employees’ hours for the month divided by 120. If the number of full-time AND full-time equivalent employees is over 50, the employer must offer health coverage to their employees and fulfill this reporting obligation. If a company has affiliates with common ownership, the consolidated employer group is treated as a single employer for determining ALE status and thus, the employee counts of FT and FTEs employees should be combined.

If an employer is not considered an ALE and has fewer than 25 employees, it may be eligible for a Small Business Health Care Tax Credit (“SBHCTC”), which could offer a savings of 50% off the costs it pays for its employees’ premiums. To be eligible for the SBHCTC, an employer needs to meet the following criteria:

– Purchase coverage through the Small Business Health Options Program (SHOP) Marketplace 

– Pay average wages of less than $50,000 a year per full-time equivalent, adjusted for inflation.

– Pay at least 50% of the qualified employees’ health care premiums

It is important to note that the employer mandated reporting requirements under the ACA apply to any self-insured company, regardless of size. The annual reporting requirement for self-insured companies include the disclosure of health coverage for their employees and dependents. Self-insured employers that are not ALEs need to complete Forms 1095-B and the transmittal Form 1094-B to meet the ACA reporting requirements. If an employer is an ALE and self-insured, they need to report health coverage information as required by fully-insured companies. In addition, they also need to complete information on the health coverage for their dependents in Part III of the 1095-C Form.

For more information on ACA reporting requirements depending on the size of your company please visit the IRS website.

Sound complicated? It is! Now more than ever, it is prudent for ALEs to utilize certified professionals and robust solutions for their ACA reporting needs.

To learn more about ACA compliance, click here.We are here to help! Please contact SPS/GZ with any questions you may have about ACA reporting. sales@greenzapato.com.

IRS Providing Temporary Relief for Retirement Plan Participants to Remotely Sign Elections

On June 3,2020, the IRS released Notice 2020-42. This notice provides temporary administration relief and flexibility to participants or beneficiaries and plan administrators in qualified retirement plans and other tax-favored retirement arrangements.

For the period between January 1,2020 through December 31,2020, participants or beneficiaries and plan administrators will be relieved of the physical presence requirement.  In states that allow remote notarization, individuals are now able to access electronic mediums to be used to make participant elections.  The electronic system must be designed to preclude any person other than the participant to make the election. In addition, the system must also provide reasonable time to review, make changes or to rescind the terms of the election before it becomes effective, as well as provide a way to confirm the election, either in writing or under a system to include applicable notice requirements.  In the case where a participant election is witnessed by a plan representative, the individual may use an electronic system with audio-video technology.  As permitted by the Coronavirus, Aid, Relief, and Economic Security Act (“CARES Act”), guidance is also given to accommodate social distancing practices in local shutdowns where the intent is to safely facilitate payments of COVID-19 related plan loans and distributions.  SPS/GZ is a full-service ACA reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms.  Let SPS/GZ be your trusted ACA tax form reporting provider.

IR 2020-119 Provides Guidance on Employer Leave-based Donation Programs That Aid COVID-19 Pandemic Victims

The IR 2020-119 was released by the IRS on June 11, 2020.  Highlighted is Notice 2020-46 where guidance is given to employers regarding cash payment donations that are made to charitable organizations that aid and assist COVID-19 victims.  Notice 2020-46 explains that in situations where employees have forgone sick, vacation and person leave time, employees will not receive the value of the donation as income and therefore, cannot be claimed as deductions.  This notice clarifies that employers may deduct these cash payments as a business expense or as a charitable donation.  Respective requirements must be met in either section. 

SPS/GZ is a full-service ACA reporting firm that prides itself in personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms.  Let SPS/GZ be your trusted ACA tax form reporting provider. 

UPDATES REGARDING FORGIVENESS OF SMALL BUSINESS PPP LOANS

When many states implemented stay at home orders to help slow the spread of COVID-19, small businesses were faced with many challenges on how they would pay bills and cover their payroll when they weren’t allowed to open and conduct business.  In the rush to help individuals and small businesses, the government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which had a provision specifically focused on helping small businesses, the Paycheck Protection Program (PPP) Loan program.  This component of the bill allowed businesses to apply for a loan in which the funds would be used to maintain their payroll and cover some operating costs.  If the employer met the criteria under the PPP loan guidelines, the loan would be forgiven.  While the money was helpful, there were issues with the initial parameters to have the loan forgiven.  

On June 5th, 2020 President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 which amends the original PPP Loan requirements to have the loan forgiven by borrowers.  These changes were in response to many small businesses that claimed they would be unable to meet the strict criteria that were laid out originally to have the loan forgiven because of the delayed opening of their businesses and reduced occupancy as a result of the social distancing obligations.   The chart below summarizes the changes.

If you are a small business and have been affected by the COVID-19 pandemic, now is the time to act if you want to apply for a PPP loan.  The Small Business Association (SBA) is in charge of determining loan forgiveness and has released the application and instructions.  Seeing that the future spread of the Coronavirus is unknown, there could be additional changes in the months ahead.   

States and Businesses Watching California’s AB5

California Assembly Bill 5 (“AB5”), also known as the “gig worker bill,” went into effect on Jan. 1, 2020.  AB5 is based on a September 2018 case in which the California Supreme Court ruled in the Dynamex Operations West, Inc. vs. Superior Court of Los Angeles.  With few exceptions, this bill was designed to require California companies that hire freelancers and independent contractors to reclassify them as employees.  Some in the trucking industry are moving out of California in response to AB5 fears and others are taking the wait-and-see approach.  Uber, Lyft, DoorDash, Instacart, and Postmates are watching court cases involving the trucking industry.  More than 50 professions and types of businesses are exempt, including insurance agents, attorneys, real estate agents, service providers, certain photographers & graphic designers, HR professionals, and other specific types of business-to-business contractors and referral agencies. 

AB5 assumes that workers are employees unless the company that hires them can pass an “ABC” Test.

  1. The worker is free to perform services without control or direction of the business.
  2. The worker is performing work tasks that are outside the usual course of business activities.
  3. The worker is customarily engaged in the work performed in an independently established trade, occupation, or business of the same nature. 

The Amway Corp. has found itself back in court in 2020, being sued by William Orage, former Amway IBO.  Orage is seeking back minimum wages from the giant for himself and others in California.  Amway, the 8+ billion-dollar, largest direct selling giant, has been using the independent business owner model for 60 years and is not a stranger to court cases.  Other MLM companies in California and across the US are watching to see how this case plays out. 

Judicious employers will best prepare by seeking legal counsel that specializes in employment law and independent contractors.  When  establishing business-to-business relationships with independent contractors, companies will need to take appropriate steps to stay compliant. Risk assessments, in the way of audits, are recommended to understand the classification of independent contractor processes.  Comprehensive audits should include the following:

  • Billing and invoicing processes
  • Contractual terms
  • Documentation processes
  • Engagement guidelines
  • Independent Contractor or Freelancer incorporation interactions
  • Independent Contractor or Freelancer incorporation requirements
  • Levels of control
  • Rate negotiations 
  • Technology Separations
  • Work structures

AB5 specifically exempts business-to-business contractors from the ABC Test.  The IRS uses a different test than California for differentiating employees and independent contractors.  We have yet to see how the IRS will treat this differentiation with respect to ACA reporting.  Employers with more than 50 or more full-time employees are required to offer affordable, Minimum Essential Coverage (MEC) for at least 95% of their full-time workforce and their dependents. California businesses, starting in 2020, following AB5 rules, will most likely need to extend health insurance coverage offers to more of their employees. 

Sound complicated? It is! Now more than ever, it is prudent for businesses to utilize certified professionals and robust solutions for their ACA reporting needs. Contact SPSGZ to learn more about ACA compliance, click here.

SBA has released PPP Loan Forgiveness Application and Instructions

The Paycheck Protection Program (“PPP”) was designed to help small businesses keep their workforce employed during the Coronavirus (COVID-19) pandemic. In order to take advantage of this special loan program, businesses must complete and file Small Business Association (“SBA”) Form 3508, the Loan Forgiveness Application. This form must be completed by the borrower, according to the instructions, and submitted to the SBA Lender who will be servicing the loan. Borrowers can also submit this form electronically through their lender. You should confirm with your lender that they are participating in this program.

The loan is forgivable if the borrower keeps employees on their payroll for eight weeks and uses the funds towards payroll, rent, mortgage interest, or utilities. The Loan Forgiveness Application consists of three parts: PPP Loan Forgiveness Calculation Form, PPP Schedule A, and the PPP Schedule A Worksheet.  There is an optional component to the application, the PPP Borrower Demographic Information Form, which requests information on the veteran status, gender, race, and ethnicity about each of the borrower’s principals.  

  • The PPP Loan Forgiveness Calculation Form summarizes the types of payments and the amounts that are eligible for loan forgiveness.   
  • The PPP Schedule A is used to calculate the total loan forgiveness amount based on the information provided on the Schedule A Worksheet, including any required reductions. Also, the PPP Schedule A lists the documentation that must be submitted along with the application.
  • The PPP Schedule A Worksheet is used to calculate the individual employee compensation that is eligible for forgiveness, determine the number of full-time equivalent employees of the borrower, and determine if there is any reduction in the total loan forgiveness amount based on prior calculations in the worksheet.

The Lender has 60 days to make a decision on your forgiveness application.  According to the National Federation of Independent Business, 80% of small business owners have applied for a PPP loan and of those, 90% received funding. There is still much concern among small business owners regarding if they will be able to meet the requirements to have the loan forgiven under the current guidelines. The SBA and the Department of Treasury have said they will release more guidance for borrowers and lenders. Many businesses are reporting that it will be difficult for them to use the loan in the eight-week window and they may not be able to get employee headcounts back to the previous year numbers due to businesses being restricted in the number of customers allowed in their establishments.  
To view the application and detailed instructions for the loan please click here.

IRS Releases Notice 2020-95: New, Flexible Guidance on Cafeteria Plans and ICHRAs

The IRS released Notice 2020-95 on May 12, 2020 detailing Notice 2020-29 and 2020-33.  The IRS provides new, relaxed rules for cafeteria plan elections. 

Notice 2020-29 provides increased flexibility guidance for mid-year employer sponsored health insurance coverage, Health FSA and DCAP cafeteria plan elections during 2020 calendar year.  Grace period and carryover period flexibility is detailed with application of unused amounts in Health FSAs to medical care expenses, as well as unused amounts in dependent care assistance programs through December 31, 2020. Employees may be permitted to apply unused amounts to pay or reimburse medical care or dependent care expenses incurred during that same time frame. 

Notice 2020-33 If there are amounts remaining in a Health HSA that may be carried over, this notice increases the maximum $500 carryover amount for a plan year to an amount equal to 20% of a maximum salary reduction contribution under Code Section 125(i) for that plan year. For 2020, this limit is $2750. The carryover limit for 2020 is $550. 

This notice also provides the ability of an Individual Coverage HRA (“ICHRA”), or Cafeteria plan, to reimburse individual insurance policy premium expenses incurred prior to the beginning of the plan year for coverage provided during said plan year. An ICHRA with a calendar year plan year may immediately reimburse a substantiated premium for health insurance coverage that begins on 1/1 of that plan year, even if the covered individual paid the premium for the coverage prior to the first day of the plan year.

SPS/GZ is a full-service ACA reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms.  Let SPS/GZ be your trusted ACA tax form reporting provider.

Tax Tip 2020-57 – People First Initiative Explanation from the IRS

Tax Tip 2020-57 was issued on May 14, 2020 to explain relief that will be provided on a variety of issues as part of the People First Initiative due to COVID-19.  Most importantly, the IRS has modified 2019 filing and payment deadline from April 15, 2020 to July 15, 2020.

The IRS is not expected to start new field, office, or correspondence audits during this historic time.  The agency will continue to distribute refund claims without in-person contact, where possible.   

The IRS may start new audits to preserve the statute of limitations when needed.  In-person meetings for current field and office audits are on hold.  Examiners, however, are working remotely when possible.  Taxpayers are expected to respond to all requests for any information during this time whenever possible.  Businesses and Corporations may begin previously scheduled audits if people and records are available.  The IRS may move forward with an audit in the best interest of all parties, understanding that COVID-19 developments may show activities. 

Taxpayers have until July 15, 2020 to respond to the IRS to verify income or that they qualify for the earned income tax credit. Taxpayers are to continue to submit all requested information. If they are not able to, the appropriate response is to contact the agency to explain why the information is not available.  The IRS will not deny credits for failure to provide information until July 15, 2020.

Appeals employees will continue to work appeals cases; however, in-person meetings are being replaced with phone or video conferences.  Taxpayers are to respond to information requests from their Independent Office of Appeals. 

The IRS is continuing protection of statutes of limitations. Taxpayers are encouraged to cooperate in extending statutes if statute expirations might be jeopardized during this period.  The IRS will issue Statutory Notices of Deficiency and will pursue similar actions to protect the interests of the government. SPS/GZ is a full-service ACA reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms.  Let SPS/GZ be your trusted ACA tax form reporting provider.

New Employee Retention Credit Helps Employers Keep Employees on Payroll

The IRS released Fact Sheet, FS-2020-05, in May 2020. This fact sheet details specific Employer Retention Credit points made in The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) that encourage businesses to keep employees on their payroll.  IR-2020-62, “the original Employer Retention Credit,” was first posted on 3/31/2020.  Both documents describe assistance for businesses with workers not being forced to choose between their paychecks and the public health measures needed to combat COVID-19.  Eligible employers can claim an Employee Retention Credit for wages paid after 3/12/2020 and before 1/1/2021.

The Employee Retention Credit (“ERC”) is available to all employers that have experienced an economic hardship due to COVID-19. This includes tax-exempt organizations. Two exceptions apply:

  • Federal, state & local governments and their instrumentalities
  • Small businesses that receive small business loans under the Paycheck Protection Program.

For purposes of the ERC, employers experiencing an economic hardship include those with suspended operations due to government orders related to COVID-19 or those who have experienced a significant decline in gross receipts. In addition, an employer may have had to fully or partially suspend operations because a governmental order limited commerce, travel, or group meetings due to COVID-19 in a manner that prevented the employer from operating at normal capacity during the specified time.

The ERC states that in order to qualify, a “significant decline in gross receipts” begins in the first calendar quarter of 2020 in which an employer’s gross receipts are less than 50% of its gross receipts for that same quarter in 2019. Further stating that “the decline ends the first calendar quarter in 2020 after the quarter in which the employer’s gross receipts are greater than 80% of its gross receipts for the same quarter in 2019.”  It is the responsibility of the employer to calculate the measures each calendar quarter.

The tax credit is comprised of 50% of up to $10,000 in qualified wages paid to each employee. The employer’s maximum credit for qualified wages paid to any employee is $5,000. Qualified wages also include the cost of employer-provided health care premiums and expenses.

Wages that qualify for the ERC vary.  The ERCs are based on the average number of an employer’s full-time employees in 2019. For example, if the employer had 100 or fewer employees on average in 2019, the ERC is based on wages paid to all employees, regardless if they worked or not.

Another example is If the employer had more than 100 employees on average in 2019.  The ERC is then allowed only for wages paid to employees for the time they did not work. In each case, the wages that qualify are for wages paid for a calendar quarter in which the employer experiences an economic hardship.

The amount of qualified wages for which an eligible employer may claim the ERC does not include the amount of qualified sick and family leave wages for which the employer received tax credits under the Families First Coronavirus Response Act (“FFCRA”). The employer is not allowed to use the same wages to determine the amount of the ERC.

To claim the ERC, beginning with the second calendar quarter of 2020, employers must report their total qualified wages and the related health insurance costs for each quarter on quarterly employment tax returns. Form 941, Employer’s Quarterly Federal Tax Return is the usual form used. Employers can receive the benefit of the ERC even before filing by reducing their federal employment tax deposits by the amount of the ERC. They will account for the reduction in deposits due to the ERC on Form 941. The IRS recently posted an FAQ about the ability both to reduce deposits for the ERC and to defer the deposit of all of the employer’s share of social security tax due before 1/1/21 under a separate provision in the CARES Act (PDF).

Advance payment of the ERC may be requested if employers do not have enough federal employment taxes to cover the amount of the ERC after deferred deposits of employer social security taxes under the CARES Act.  As explained in the FAQ,  employers are allowed to request advance payment credit by submitting completedForm 7200 via FAX # 855-248-0552.  Subject Line: Advance Payment of Employer Credits Due to COVID-19.  Employers claiming the ERC are required to keep all employment tax records supporting the credit for a minimum of four years.

For a copy of FS-2020-05, please click on the link below:
https://www.irs.gov/newsroom/irs-employee-retention-credit-available-for-many-businessefinancially-impacted-by-covid-19

SPS/GZ is a full-service ACA reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms.  Let SPS/GZ be your trusted ACA tax form reporting provider.

The Affordable Care Act During The COVID-19 Pandemic

Throughout the United States and the world, Coronavirus (COVID-19) has changed daily life in many ways.   From a health standpoint, COVID-19 is one of the most horrific and puzzling pandemics humanity has ever faced.  Globally, over 4.3 million cases have officially been reported (with some sources predicting the actual number of cases may be as many as 10 times higher than reported due to testing availability).  Some 290,000 people have died from this terrible virus, with over 83,000 of those deaths occurring in the USA. 

During these uncertain times when health insurance is so critical, The Patient Protection and Affordable Care Act (“ACA”) is front and center in the political arena.  Lately, there have been some wins and losses in the ACA column.  While the Trump Administration is still trying to abolish this critical law that is now that backbone of the nation’s healthcare system without any alternative in place, many Democratic and even GOP politicians have argued that at least part of the law should be preserved (particularly during a pandemic when millions of Americans depend on the ACA for their insurance coverage).  The ACA faces another challenge in front of the Supreme Court, who will hear a lawsuit later this fall from the GOP-led states that argue that the ACA was rendered unconstitutional after Congress eliminated the Individual Mandate tax penalty for not having health insurance.  Although the Supreme Court will not likely issue a decision until 2021, the fight now to preserve the ACA is more dire than ever.  The House Democrats filed a brief with the Supreme Court on May 6, 2020, stating that “…. the nation’s current public-health emergency has made it impossible to deny that broad access to affordable health care is not just a life-or-death matter for millions of Americans, but an indispensable precondition to the social intercourse on which our security, welfare, and liberty ultimately depend.” 

In addition to providing insurance to millions of Americans through the Medicaid expansion program and the ACA marketplace, the law also has a very popular provision that bans insurers from denying coverage to individuals with preexisting medical conditions.  In the “win” column for the ACA currently is the fact that without it, COVID-19 could be stamped as a preexisting condition in medical records, which could make it difficult for the over one million Americans who have already tested positive for Coronavirus to obtain insurance.  With unemployment through the roof, many Americans will be faced with no health insurance until they can find another job or enroll in the ACA marketplace insurance during an open enrollment period.  Already, 11 states/districts have created special open enrollment periods due to COVID-19, symbolizing how essential this law is to the fabric of our healthcare system.

While COVID-19 has had devastating effects on human lives, there have also been rippling effects throughout our economy, with many states still imposing closures of non-essential businesses.  Unemployment rates are at levels not seen since the Great Depression.  Many companies have furloughed employees with hopes to hire them back once the economy begins to open up again.  Even those who still have their jobs have faced pay cuts across the board.  Sadly, many businesses may never be able to reopen.

Applicable Large Employers (“ALEs”), defined as employers with 50 or more full-time and full-time equivalent (“FTE”) employees, are starting to wonder how COVID-19 will impact their reporting obligations in 2020 and into the future.  With the Supreme Court decision pushed out until at least 2021 and with the added burden of the Coronavirus pandemic on the healthcare system, it seems unlikely that any significant changes to the ACA will occur in 2020 and beyond, particularly as it relates to ALEs.  The IRS has been stepping up its enforcement efforts for ACA compliance, including expansive auditing and issuance of penalties to ALEs on a steadily increasing basis.  With a strong need for more revenue now, those enforcement efforts are not likely to curtail.  Reporting obligations for ALEs, including the mailing and filing of Form 1095-C and the filing of the Form 1094-C, are expected to stay the same in 2020 regardless of the pandemic.

ALEs with a large variable hour workforce (such as the restaurant, hospitality, and healthcare industries with many shift workers) will have the added burden of complicated employee measurement due to the mass layoffs and furloughs occurring during this current economic climate.  Many of the furloughed workers may ultimately be rehired, creating additional confusion and complex measurement scenarios. 

During a healthy economy, the measurement for the ACA variable workforce is cumbersome and typically requires the expertise of professionals and sophisticated software platforms.  With the COVID-19 pandemic, measurement scenarios will be much more complicated and challenging.  Classifying employees properly in the IRS filings is critical. Incorrect classifications of full-time and FTE employees can lead to significant ACA penalties from the IRS. While Monthly Measurement and Look-Back Measurement Methods are both acceptable under the ACA, the Look-Back Method is highly recommended with the current layoff and furlough rates.  The Rule of Parity within the ACA allows an employer to classify a returning employee as a rehire if their absence was less than 13 consecutive weeks (26 weeks for educational organization employers), providing that they had previously worked at least 4 consecutive weeks and their absence from work was greater than the period of employment immediately before their termination. 

It is critical to note that measurement of ALE status (50 or full time or FTE employees) and employee eligibility for benefits (average of 130 hours worked per month during a measurement period) are determined in the PRIOR year.  Thus, companies that had 50+ employees in 2019 will be considered ALEs for the 2020 reporting year, regardless of current headcount.  Also, employees who worked an average of 130+ hours per month in 2019 should continue to receive benefits in 2020 for the months they are employed.  The 2020 measurement ­­­­­­­­­­­period will determine ALE status for 2021.  If employers fall below 50 or more average full-time employees in 2020, then they will not need to report in 2021.  The calculation of FTE employees involves taking the total hours worked of all non-full-time employees for each month and dividing this number by 120.  The quotient is added to the respective monthly headcount for the full-time employees.  All months are added together and divided by 12 to determine the average monthly headcount for ALE determinate purposes.

Sound complicated? It is!   Now more than ever, it is prudent for ALEs to utilize certified professionals and robust solutions for their ACA reporting needs.

To learn more about ACA compliance, click here.

We are here to help!  Please contact SPS/GZ with any questions you may have about ACA reporting.

What You Need to Know for 1099 Filings in 2020

The IRS is bringing back the 1099-NEC form to report non-employee compensation.  The 1099-NEC form was used in the past but was discontinued in 1982 and has returned starting for the 2020 tax reporting year. Since the discontinuation of the 1099-NEC Form 38 years ago, nonemployee compensation had been reported on the 1099-MISC in Box 7 when filing with the IRS. 

In 2015, the Protecting Americans from Tax Hikes Act (PATH Act) changed the due date for filing Form 1099-MISC with Box 7 payments with the IRS to January 31st.  Before this legislation, the due date for e-filing the 1099-MISC, regardless of which boxes were being reported, was March 31st.   This changed in the reporting deadline caused confusion for employers, taxpayers and the IRS.  Employers began separating the types of payments reported on 1099-MISC forms in order to meet the required updated deadline.  The IRS also sometimes mistakenly treated forms that were not reporting Box 7 payments as late returns.

The 1099-NEC form is intended to help avoid the confusion by separating the nonemployee compensation payments on its own form.  Box 7 on the 1099-MISC form will now be reported in Box 1 of the 1099-NEC form.  The information on 1099 filings should include payments made that meet all four of these conditions: 

1.  It is made to someone who is not your employee

2. The payment relates to services in the course of your trade or business

3.  It is paid to an individual, partnership, estate or in some cases, corporations

4. The payments made to the payee totaled $600 or more in a calendar year.

For a more information on 1099-NEC and 1099-MISC form filing requirements see the IRS instructions, https://www.irs.gov/pub/irs-pdf/i1099msc.pdf.

Before filing 1099-NEC Forms, be sure the recipient’s Taxpayer Identification Number is correct to avoid IRS penalties.  Form 1099 -MISC and 1099-NEC are frequently audited, which can result in large penalties to organizations.  Companies should request a W-9 Form from each recipient prior to issuing payments so they have accurate information when it comes time to file 1099 forms. 

Let SPS/GZ be your trusted 1099 tax form reporting provider. Our solution allows companies to simply upload their 1099 data file to our secure portal in a few easy steps and we handle everything else.

IRS Releases Guidance on Expenses Paid with Forgiven PPP Funds

The IRS released Notice 2020-32 on April 30, 2020.  In the notice, the IRS provides guidance regarding the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  Guidance and rules regarding the Paycheck Protection Program (“PPP”) loans continue to unfold. Prior to this notice, it was unclear whether a payment would be considered a “tax benefit” or not.  The notice explains that loan recipients will be eligible for forgiveness of a covered PPP loan in the amount equal to the total of payroll, mortgage interest, rent and utilities incurred and paid during the defined eight-week period following the funding of said loan. 

Furthermore, income associated with the forgiveness is excluded from gross income for purposes of the Code pursuant to the CARES Act.  This guidance underscores the fact that “double dipping” will not be allowed under the IRS Code for an expense that is otherwise deductible.    

https://www.irs.gov/pub/irs-drop/n-20-32.pdf

SPS/GZ is a full-service ACA reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms.  Let SPS/GZ be your trusted ACA tax form reporting provider.

Supreme Court Ruling on ACA Risk Corridor Payments

On April 27th, 2020, the Supreme Court ruled in favor of four health insurers who filed suit against the United States for billions of dollars for failure to pay risk corridor payments established as part of the Affordable Care Act (“ACA”), Section 1342.  The ACA provision was intended to prevent hefty premiums and encourage risk-averse insurers to participate in the Marketplace by offering policies that covered individuals with pre-existing conditions and who might have higher than expected insurance claims. According to the National Law Review, “To mitigate insurers’ risk entering unpredictable new marketplaces, Congress created the “Risk Corridors” program, set out in §1342 of the ACA, which allowed insurers to share both profits and losses in the new marketplaces’ first three years of existence. Under § 1342, if the insurance plans were not profitable, then the federal government “shall pay” the insurers according to the formula specified in the statute, to compensate for their losses; but if the insurance plans were profitable, then the insurers were required to share the benefits with the federal government by paying it according to the statutory formula.”

In the case, Maine Community Health Option v. The United States, by a vote of 8-1,the Supreme Court awarded over $12 billion in unpaid risk corridor payments to insurers from 2014 to 2016. The Supreme Court ultimately ruled against the Federal Government, who argued that in 2014, after the ACA legislation was established, Congress passed an appropriations bill, blocking the payments of CMS (Center for Medicare and Medical Services) funds to pay for the program, claiming the corridors would be revenue-neutral. The insurers when determining their premiums for the opening of the exchange health plans were told by the CMS, they would be paid regardless of the amount the government collected through the program. Unfortunately, in the first three years, the insurers’ claims vastly exceeded the amount collected. This deficit resulted in many smaller insurers and co-op health insurance plans to go out of business Other insurers left the Marketplace or increased their premiums. The insurers argued that the government violated the original legislation, which claimed they would be reimbursed for losses if they participated in the Marketplace exchanges and this could not be revoked by Congress after the fact with riders in an appropriation bill.

Ultimately the decision by the Supreme Court determined insurers were owed the risk corridor payments.  It was stated in Justice Sonia Sotomayor’s majority opinion “these holdings reflect a principle as old as the Nation itself: The Government should honor its obligations.” This ruling is imperative to keeping the ACA exchanges in place and help keep health insurance premiums affordable to all. Insurance experts claim that the lack of funding to help these insurers in the preliminary phase of the ACA caused premiums to increase in the Marketplace. However, according to the Kaiser Family Foundation, “ACA premiums are falling in many areas of the U.S. in 2020”. To see how premiums are changing in your region visit,  https://www.healthcare.gov/health-plan-information-2020/ where you can access a pricing tool for 2020 health plans.

Currently 11 States/Districts Have Special ACA Open Enrollment Periods due to Coronavirus

During the COVID-19 pandemic, Americans are facing many hurdles: a healthcare crisis, a struggling economy, social isolation, remote learning, working from home, and many other challenges. To help flatten the curve and slow the spread of the virus, most states have issued a stay at home order, resulting in many non-essential businesses having to close.  Since some businesses were unable to continue operations, they had to make the difficult decision to lay off employees.   Many of these individuals who lost their jobs also lost their health insurance that came with it.  

Americans are now not only worried about being exposed to the virus but also how they will pay for their treatment with no health coverage if they were to become infected.  According to the Kaiser Family Foundation, the cost to an uninsured patient that is hospitalized with severe symptoms of COVID-19 could exceed $40,000.  To help reduce the risk of excessive medical costs, several states have established a special open enrollment period to make the process of enrolling in health coverage easier with fewer restrictions.  Currently, under the ACA guidelines, an individual who has a life event, such as loss of employment, can enroll in health coverage in the federal marketplace within 60 days of losing his/her job. However, with the expansion of the state’s own ACA healthcare special open enrollment periods, an individual can enroll without having to prove special conditions, such of loss of employment or other “qualifying life events” which would allow an individual to enroll in health insurance outside of the open enrollment period.

There are 10 states, plus the District of Columbia, that have their own state-run marketplaces and have been able to establish a special open enrollment period These states include California, Colorado, Connecticut, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, and Washington. Other states, that use the federal government health insurance marketplace, www.healthcare.gov, have not offered an extended open enrollment period to Americans who may have been without insurance or lost their insurance.  Two major national associations, America’s Health Insurance Plans and Blue Cross Blue Shield Association, have sent a letter to Congress asking the Federal Government to consider a special enrollment period to help alleviate the worries of both the hospitals and individuals so that those being admitted will have adequate health coverage during these uncertain times. According to the Kaiser Family Foundation, there were approximately 28 million uninsured Americans before the COVID-19 pandemic.  Based on the model published by Proceedings of the National Academy of Sciences of the United States, it is estimated that between 2%-7% of the uninsured will require hospitalization.  While the states that established special open enrollment periods to help the uninsured is an option for individuals residing in these areas, those who are uninsured in other regions of the United States need to look into possible affordable options for health insurance to avoid the possibility of facing large medical bills.

The Affordable Care Act (ACA/Obamacare) turned 10 years old last month

According to an NBC News article, the COVID-19 Pandemic could be a true test of how well the ACA will handle significant coverage loss.  Prior to the pandemic, approximately half of Americans were insured through their jobs.  Millions are finding themselves in a most unfortunate position today due to having lost health insurance in addition to having lost their jobs.

10 U.S. states and Washington, DC are offering their uninsured residents
an opportunity to sign up for a health plan outside of the traditional enrollment season. (CA, CO, CT, MA, MD, MN, NV, NY, RI, VT, WA, DC).

SPS/GZ is a full-service ACA reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms.

Contact us to learn how SPS/GZ can be your company’s trusted partner for stock plan administration and tax form reporting services.