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Small businesses and Obamacare: the tax considerations

One of the stories we've been following in this blog is role that tax law will pay in the implementation of the Affordable Care Act (ACA). As we discussed in our April 16 post, the ACA - otherwise known as Obamacare - will affect taxes in several ways.

Small business owners, for example, are trying to figure out how the tax credits and tax penalties included in the new law will apply to them. In California and across the country, these businesses have many questions.

It is a myth that the ACA actually requires businesses to provide health insurance to their employees. But myths usually have some basis in reality. And in this case, it's true that businesses with 50 or more full-time employees can face tax penalties for failing to offer health insurance.

At $2,000 per workers, the tax penalties are significant. Small businesses, defined as businesses with fewer than 50 employees, do not face these penalties. But that still leaves owners and managers of these businesses wondering whether to offer, or continue to offer, health insurance to their employees.

After all, the cost of doing so may put those businesses at a competitive disadvantage compared to other small businesses. This is because small businesses that offer health insurance would be taking on costs that other small businesses in their market do not have.

Overall, small businesses tend to have relationships with government that might be described as distant. When necessary, they are prepared to defend their rights through tax litigation. But small businesses are well known to leave many potential tax credits on the table. And that includes tax credits for small businesses to help implement Obamacare.

Source: "Hey, Small Business Owners - Obamacare Tax Credits Available Now," KQED, Kelly Weiss, May 2, 2013

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