400 Capitol Street, NW
Washington, DC 20001
- Toll Free 1.888.564.6273
- Local 202.783.3870
Listen up, employers. While much media attention has been given to ObamaCare’s highly unpopular Individual Mandate, little scrutiny has been given to the “other mandate,” the one on you. Both mandates will be enforced by the IRS. Of the two, the Employer Mandate is arguably the more draconian, getting IRS even more involved in the workplace.
Here’s how it will work -- and what could happen to you, if you don’t fall in line and salute.
The Employer Mandate requires “large” businesses to provide health care to their employees, starting January 1, 2014. If employers fail to comply, they will face punishing regulations, information reporting, and hefty tax fines courtesy of the IRS.
What’s a “large” business? An employer with over 50 full-time equivalent employees (counting those working 30 or more hours plus part-time workers counted at a lesser value). All such firms must provide health insurance benefits to their workers. This insurance must be “affordable” for each employee, less than 9.5 percent of the employee’s W-2 income. It must also be “adequate,” meaning the plan covers, on average, 60 percent of healthcare expenses. However, employees can only receive federal premium subsidies in an exchange, if they are not offered affordable, adequate health care by their employer and meet specific income requirements. If one or more employees in a firm are subsidized through the exchange, the firm is liable to be hit with penalty fines for failure to provide affordable, adequate coverage.
The penalty fines will be levied by the IRS in the form of taxes. Here’s how they’ll work. If an employer of 50 or more employees does not offer health insurance and has at least one full-time employee subsidized through a health care exchange, he or she must pay $2,000 per full-time employee after the first 30. For example, if you have 50 employees, one who is subsidized in the exchange, and you do not offer health insurance, you must pay a whopping $40,000 per year. If you do offer insurance, but it is not “affordable” and “adequate,” you must pay the lesser of $3,000 per subsidized employee or $2,000 per non-subsidized employee (minus the first 30).
The National Federation of Independent Business shows the tax liability of nine hypothetical companies:
On top increasing administrative costs, companies are punished for trying to employ more people and encouraged to shift individuals from full-time to part-time status. Compare situation 9 ($44,000 in taxation) to situation 6 ($2,000 in taxation). Companies can substantially reduce their tax penalty exposure by replacing full-time with part-time employees.
How will IRS enforce the new penalties? Primarily through summons letters and tax liens. A summons letter demands more information; it can be quite threatening in tone. If you receive a summons letter, call your lawyer. A tax lien means the IRS is simply taking what it thinks you owe, from your bank accounts or other assets. A notice of federal tax lien can badly damage your creditworthiness. Lien filings are picked up by the three credit rating agencies and remain on your credit report for seven years from the date a tax liability is resolved, or longer if it is not resolved. A tax lien can be particularly devastating to a small businessman, as it often cuts off his access to credit. Given the health care law’s mindboggling complexity, we can be sure that many an innocent businessman will receive harassing summons letters and unjustified ObamaCare lien notices from their local IRS office.
In its 2010 annual report to Congress, the U.S. Government’s Taxpayer Advocate reported that the IRS has been using tax liens more and more frequently in recent years, and more aggressively, with little compassion for struggling employers. “IRS lien filing policies,” the report says, “are all about ‘protecting the government’s interest’ and don’t consider the impact on the taxpayer.”
The trouble doesn’t end there. In addition to being charged with collecting complicated mandate penalties, the IRS is also going to require even more information from employers, including details about the insurance they purchase for their employees, the size of their workforce, and the number of hours worked by their staff. All of this information will be funneled into a truly massive data collection scheme known as the “ObamaCare Hub.” Many federal agencies will contribute data about us to the Hub, but the IRS will be front and center.
Whose idea was it to put the IRS in charge of enforcing our health care laws? IRS agents have recently been caught targeting conservative and patriotic political groups for political discrimination, and are currently being sued for alleged illegal seizure of 60 million medical records. What is to stop them from using their new health care powers to abuse companies they don’t like? By the way, the woman who was in charge of targeting political groups has now been put in charge of the new IRS health care enforcement office.
Employers are already struggling to stay afloat. Now they’re being asked to strictly follow a myriad of complex rules, knowing that at any moment they could hear the terrifying sound of IRS jackboots.
The IRS should not be involved in enforcing the Employer Mandate. It will only lead to an ever more intrusive government that will invade our privacy and further strangle the American economy.