Most small to mid-sized businesses that we’ve spoken with have reacted negatively to the new health care mandate. Many have contemplated a whole host of tactics to avoid the 50 or more employee rule requiring health care be provided to employees. But, as some have learned, the rules make it very difficult to avoid without deliberately demoting and/or firing workers.
Avoiding the 50 full-time employee or more rule
Small businesses with less than 50 employees will not be fined for not providing health care coverage. Specifically, they will avoid a fine ranging from $750 to $3,000 per employee if they have over 50 employees and choose not to provide coverage.
Those companies with a headcount near or above 50, have contemplated setting up separate entities to avoid the rule. Sounds like a great idea, right? However, the health care bill addresses only the controlling group of the business as opposed to the entity itself. For instance, if you own a retail store as well as the building itself and also rent space out to other tenants, you may decide to separate the rental business from the retail business to divide headcount. Nice try! The government doesn’t care that there are two separate entities setup, they will treat both businesses as one since you are the controlling owner.
What if I own two totally separate businesses or my spouse is also a business owner?
These are the situations where it can get very taxing on entrepreneurs. If you are the owner of many different businesses, the government will treat them all as one. If twenty employees work for you at one business operation and forty at another, you’ll be liable to pay health care since you are employing a total of sixty employees across businesses. The same logic may also apply if your spouse also owns a business and you file joint tax returns.
What can small businesses do to avoid the 50 employee rule?
Not much besides shifting full-time employees to part-time. The other option is paying the penalties as opposed to providing health care for all, since the penalties can easily be less than the actual health care costs.
If you own a business, we’d like to hear from you. What are you planning on doing in response to the new health care mandate?
More Questions? Ask your small business tax questions or hire an accountant online.
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