By Jerry Lopatka, Managing Principal
Jerry Lopatka is Dugan & Lopatka’s managing principal. He specializes in business tax planning for privately-held companies and has extensive experience in the areas of corporate tax, LLCs, real estate transactions, and succession planning. This article appeared in the November 9, 2015, edition of the Daily Herald Business Ledger.
This is a busy time of year for everyone. And it’s not just the holidays.
Business owners and CFOs have a lot of year end projects on their plate. They can include budgets and forecasts, taxes, banking matters, insurance renewals, year-end bonuses, retirement and benefit plan updates – the list goes on.
Are you preparing your business for the "Cadillac" tax? This Affordable Care Act provision is actually named the "Excise Tax On High Cost Employer-Sponsored Health Coverage," and is scheduled to take effect in 2018. Starting that year, this 40% tax will be assessed on the cost of health benefits above a certain threshold. The initial threshold is an annual cost of more than $10,200 for individual plans ($27,500 for a family).
The tax will be due annually and is nondeductible. Who will pay - the insurance company, a third-party provider, or you as the employer – depends on the type of coverage. For example, if you offer employees a group health plan through an insurance company, the insurance company will make the payment. However, under current rules, you're responsible for calculating the amount due.
The IRS is just beginning to release guidance for calculating and reporting the Cadillac tax. Because the tax applies to a wide range of health coverage, you'll need to determine how your business will be affected.
Contact your Dugan & Lopatka CPA at (630) 665-4440 for more information.
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