The Affordable Care Act (ACA) requires employers across all segments to provide their employees with a written notice of the existence of public health insurance exchanges (also known as the Marketplace) and eligibility for premium tax credits or cost sharing (if applicable for employer’s plan), regardless of whether the exchange is operated by the state or the federal government.

These notices must:

• Inform employees of the existence of state health care marketplaces
• Explain what services will be provided
• Explain how the employee may contact the marketplaces to request assistance
• Detail how employees may be eligible for a premium tax credit or cost-sharing reduction if the employer’s plan does not meet certain requirements
• Explain that the employee may lose employer contributions for health care benefits if he/she enrolls in the marketplace, and that all or some portion of such a contribution may be excludable from income for federal income tax purposes

The Department of Labor has created notice templates for employers who provide health benefits as well as templates for employers that do not. All employers, regardless of their size, must distribute these by October 1. You may wish to speak with your own legal counsel when considering whether to use the model notices provided.

Victoria McCoy of Crown Benefits, who will conduct a workshop for Whalen clients on the health insurance exchanges on September 26, notes that questions within the model notice ask employers to indicate if their plans meet the minimum value standard. If your plan does not meet the minimum value standard, your employees may be able to get the tax credit by buying health insurance on the federal or state exchange.

She points out that a health plan meets the ACA’s minimum value standard if it pays for at least 60 percent of each covered employee’s health care costs.

Employers can make this determination by using the Minimum Value calculator available on the Center for Consumer Information and Insurance Oversight (CCIIO) website.

The IRS recently issued guidance on the tax credit available to certain small employers that offer health insurance coverage to employees.

Section 45R(a) provides for a health insurance tax credit in the case of an eligible small employer for any taxable year in the credit period. The regulations define an eligible small employer as:

• An employer with no more than 25 full-time employees for the taxable year
• Whose employees have average annual wages of less than $50,000 per FTE (as adjusted for inflation for years after Dec. 31, 2013)
• Having a qualifying arrangement in effect that requires the employer to pay a uniform percentage (not less than 50 percent) of the premium cost of a qualified health plan offered by the employer through a Small Business Health Options Program – or SHOP – Exchange.

Many provisions of the Patient Protection and Affordable Care Act of 2010 have recently gone into effect, and some significant provisions will do so in 2014 and 2015. To help individuals and families, employers (both large and small), and other organizations learn more about how they’ll be affected, the IRS has launched a new website: www.irs.gov/uac. The site offers information on the tax benefits and responsibilities for various groups, such as:

• Individuals and families — new additional Medicare taxes, changes to the itemized medical expense deduction and open enrollment for the Health Insurance Marketplace
• Employers — determining whether you’re a large or small employer, shared responsibility payments for large employers, and the small business health care tax credit
• Other organizations — tax provisions for insurers, certain other business types and tax-exempt and government organizations

While the new website provides substantial information on tax-related provisions of the health care act, it’s no substitute for professional advice. So please contact us for more information on how you can take advantage of any benefits available to you and minimize any negative tax consequences.

Be Prepared in the Event of a Natural Disaster and Understand Your Responsibility for Retaining Records

With all the flooding that has occurred in Ohio over the past two months, now is probably a good time to review how you are storing and keeping your tax and financial records safe in case of a natural disaster and how long you need to retain these documents.

Below are five strategies that the IRS recommends to protect your important financial records.

1.  Backup Records Electronically. Keep an extra set of electronic records in a safe place away from where you store the originals. You can use an external hard drive, CD or DVD to store the most important records. You can take these with you to keep your copies safe. You may want to store items such as bank statements, tax returns and insurance policies.

2.  Document Valuables. Take pictures or videotape the contents of your home or place of business. These may help you prove the value of your lost items for insurance claims and casualty loss deductions. Publication 584, Casualty, Disaster and Theft Loss Workbook, can help you determine your loss if a disaster strikes.

3.  Update Emergency Plans. Review your emergency plans every year. You may need to update them if your personal or business situation changes.

4.  Get Copies of Tax Returns or Transcripts. Visit IRS.gov to get Form 4506, Request for Copy of Tax Return, to replace lost or destroyed tax returns. If you just need information from your return, you can order a transcript online.

5.  Count on the IRS. The IRS has a Disaster Hotline to help people with tax issues after a disaster. Call the IRS at 1-866-562-5227 to speak with a specialist trained to handle disaster-related tax issues. You may also visit IRS.gov to get more information about IRS disaster assistance. Click on the “Disaster Relief” link in the lower left corner of the home page.

How long should you keep tax returns and records?

Financial records may have to be produced if the IRS or a state or local taxing authority was to audit your return or seek to assess or collect a tax. In addition, lenders, co-op boards or other private parties may require that you produce copies of your tax returns as a condition to lending money, approving a purchase, or otherwise doing business with you.

We advise clients to keep returns indefinitely and retain the supporting records usually for six years. In general, except in cases of fraud or substantial understatements of income, the IRS can only assess tax for a year within three years after the return for that year was filed (or, if later, three years after the return was due).

For example, if your 2011 individual income tax return is filed by its original due date of April 15, 2012, the IRS will have until April 15, 2015, to assess a tax deficiency against you. If you file your return late, the IRS generally will have three years from the date you filed the return to assess a deficiency.

However, the three-year rule isn’t ironclad. The assessment period is extended to six years if more than 25 percent of gross income is omitted from a return. In addition, where no return was filed for a tax year, the IRS can assess tax at any time (even beyond three or six years). If the IRS claims that you never filed a return for a particular year, keeping a copy of the return will help you to prove that you did.

While it’s impossible to be completely sure that the IRS won’t at some point seek to assess tax, retaining tax returns indefinitely and important records for six years after the return is filed should, as a practical matter, be adequate. Since our firm filed your return electronically, we provided you with a paper copy of the return for your records.