This month, as 2014 comes to a close, we are taking a look back at some of the most important blog topics we have covered both in case you missed them, and to help you prepare for 2015!
Individuals earning below the tax filing threshold of $10,150 will not pay a penalty. Others earning above $10,150 will pay based on earnings over the tax threshold of $10,150.
For taxes filed for the year 2014:
- Individuals earning between $10,150 and $19650, there is a flat penalty fee of $95 per adult (47.50 per child under 18). Thus, a single adult making $19,000 would pay $95 (1×95); a family of two adults at $19,000 would pay $190 (2×95); and a family of one adult and one child at $19,000 would pay $142.50 (95+47.50). The maximum penalty per family with a household income below $19,650 is $285.
- Individuals earning above $19,650, will be required to pay a penalty equal to 1% of their annual income. For example, a single adult employee earning $40,000 per year would be required to pay $400 (40,000×1%). Whereas, a family of six with two adults each making $50,000, the total income would be $100,000. Therefore the family would pay $1,000 (100,000×1%).
The maximum penalty for 2014 is $2,448 per individual annually, which is 1% of a yearly income of $244.800. Earnings above that for individuals are capped at the individual maximum penalty.
The maximum family penalty issued by the IRS was $12,240 for a five-member family, and will only impact households with a combined yearly income of $1.2 million or more.
*Remember these penalty rates are only for the year 2014, and will increase in 2015 and beyond. The 2015 penalties will be the greater of $325 per person or 2% of total income. 2016 Rates will rise further to the greater of $695 per person or 2.5% of total income. The years following 2016, the penalty rates will be adjusted according to inflation.
Call HR Strategies today for assistance! 770-339-0000 or visit our website at www.hr-strategies.com.
Businesses everywhere are looking to assess their options and understand how the Affordable Care Act (ACA) will affect them and their employees. Businesses are no longer waiting for a change in the political and regulatory landscape but to strategically do what’s best for their bottom line. A recent article by Paul Christiansen in the Wall Street Journal discusses going “protean”; that is having a smaller set of core employees and outsourcing other functions. Christiansen states that “by going protean, some companies are able to adjust their number of employees to below 50 (the number at which many fines and regulations of the Affordable Care Act begin) and avoid their very own fiscal cliff”.
Business owners have looked at the fines, and struggled to put together a plan of action that will best protect them from ensuing regulatory fines in association with the ACA. Companies may be considering laying off employees, reducing employees to part-time status, or raising prices of their goods and services to pay for the fines. Unfortunately, these tend to be short-term solutions. Employers may be better suited by switching their strategy from “How can we avoid the ACA” to a strategic thinking of “How can we afford and sustain under the ACA?”
Although “protean” may not be a one-size-fits-all solution for most small employers, outsourcing certain core competencies outside of the business unit may certainly fit the protean model. Outsourcing can take on a variety of models, and companies must carefully consider the risks and benefits of each. While simply making employees 1099 contractors may seem like an easy way to “outsource” and contain costs, one must remember the DOL and IRS’ strict definitions of an employee versus an independent contractor. In addition to the “independent Contractor Test”, both IRS and DOL have taken the position that if a contractor does the same job that a typical employee may do, then they are in fact an employee—not a 1099 or independent contractor. Ultimately, this quick-fix opens the company to further fines for misclassification, and ends up costing the company more than just potential ACA penalty taxes.
So how can a company go protean and outsource while avoiding further defiance of regulations? One way is to outsource responsibilities via a corporation-to-corporation relationship of their non-core tasks. These tasks can include accounting, marketing, IT, legal, finance, and many other areas. Outsourcing human resource functions has become one of the most popular, as the variety of state and federal regulations has become increasingly complicated. Companies are choosing to contract with Professional Employer Organizations (PEO’s) to alleviate their companies of the burdens of payroll processing, employee benefit administration, training, regulatory compliance and many other human resource responsibilities. In going protean by contracting with a PEO, companies are able to focus on their core competencies, and receive professional help with compliance of many regulations (including the Affordable Care Act) while reducing man hours spent on non-core tasks.
As a Professional Employer Organization (PEO), HR Strategies provides the customizable HR solutions (including but not limited to payroll, benefits, workers compensation, tax administration, regulatory compliance, HR consulting, training solutions) and expertise of a large corporation’s personnel department in an affordable and effective solution. HR Strategies enables clients to reclaim time, stabilize and reduce labor costs, and stay compliant with government regulations. Call us today to begin strategically planning for the ACA by utilizing our PEO services. 770-339-0000.