As a small business owner, you’re likely no stranger to the joys and challenges of running a successful operation. Finding creative ways to stay profitable while caring for your employees is key — but it’s no easy feat. One important detail that requires special attention is health care tax; understanding its basics can help ensure you’re staying in compliance with regulations as well as taking advantage of all the credits and deductions available to facilitate financial security and growth. In this blog post, Jay Holstine will break down the info you need on small business healthcare tax so that you feel informed and confident when navigating this complicated topic!
Jay Holstine Makes Sense Of The Small Business Health Care Tax
Making sense of the small business healthcare tax can be difficult, says Jay Holstine. Knowing what is required and understanding how to apply it can save time and money for small businesses. This article outlines the basics of this tax, including who has to pay it, when it needs to be paid, and what kind of incentives are available for those who qualify.
The Small Business Health Care Tax (SBHCT) is an annual levy imposed by the Internal Revenue Service (IRS) on employers with 50 or fewer full-time employees. It requires employers to provide a minimum level of health insurance coverage for their workers or face financial penalties. The SBHCT applies only to employers that do not offer group plans such as HMOs or PPOs, and it does not apply to self-funded plans.
To determine whether an employer has to pay the SBHCT, the IRS looks at the number of full-time equivalent employees. This figure is calculated by adding together the hours worked by all part-time employees during a month, then dividing that total by 120. If this amount exceeds 50 or more, then the employer must pay the tax.
According to Jay Holstine, the obligations of employers under SBHCT vary depending on their size and other factors. Generally speaking, small employers with fewer than 25 full-time equivalents are eligible for certain credits based on their contributions toward employee health care premiums and other applicable costs. In addition to these credits, some employers may be eligible for tax deductions related to health insurance expenses.
In 2018, the IRS reported that over 1.5 million small businesses paid the SBHCT. This generated more than $20 billion in federal tax revenues for the government. Additionally, the estimated average amount these employers paid was about $12,000 per business.
For example, a small business owner with 15 part-time employees (averaging 15 hours per week each) could be required to pay the SBHCT if their payroll amounted to at least $54,000/month ($15 x 120 = 1,800; 1,800/120 = 15; 15 full-time equivalents). In this case, even though there are no full-time employees on staff and only 15 part-time workers, the employer would be required to pay the SBHCT.
Jay Holstine’s Concluding Thoughts
Ultimately, the Small Business Health Care Tax is a complex levy that can be difficult to understand and navigate, says Jay Holstine. However, with careful research and planning, small businesses can identify their obligations under this tax and take advantage of available credits and deductions where applicable. Doing so could save them time, money, and stress in the long run.