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Megan C
Megan C , Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16539
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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We have an individual health care plan. My small business pays

Resolved Question:

We have an individual health care plan. My small business pays the premiums, our plan will need to switch over to the ACA.

What are some possible ways to handle Obamacare as a small business owner (S corp) with only myself as the employee?

Do we go through the individual exchange on healcare.gov or do I have to use the small business owners section?

Can the business continue to deduct the insurance premiums going forward?
Submitted: 2 years ago.
Category: Finance
Expert:  Megan C replied 2 years ago.

Megan C :

Hello, and welcome to JustAnswer.com

Megan C :

How are you today?

Customer:

Good thanks.

Megan C :

According to Internal Revenue Code, section 45R, paragraph (e)(1) there is no tax credit available for owners of the S Corp

Megan C :

So, you would not be eligible for tax credits

Megan C :

We are only in the initial stages of Obamacare, so keep in mind that things are always changing. Congress will revisit the law again in 90 days as part of the budget negotiations.

Customer:

So that means if the business pays, there are not the tax credits, but if we had the business not pay the premiums, we could qualify for the credits? What would be the best way to decide which is best?

Megan C :

You are treated as self employed for purposes of the law, and there's the self employed health insurance deduction instead

Customer:

I'm still trying to wrap my head around how it all works so I can make an informed decision when it comes time to change.

Megan C :

Here's a good resource for a small business CLICK HERE

Megan C :

Quite honestly, the whole thing is a mystery and things are likely to change soon yet again.

Customer:

Thanks. Since I'm the owner and only employee, I can have the business pay the premiums, or have the business stop paying the premiums and sign up for an individual account at the ACA and receive the tax credits based on income level, but then the premiums wouldn't be a business expense. That's what I'm trying to figure out, or even if I understand it right. Our policy isn't a small business or group policy.

Megan C :

You would be treated as self employed on the exchange. That's the route that you would go. I would go thorugh it like that instead of just as an individual

Customer:

Okay, that helps. So it sounds like I would select the Small Business Owners option on the homepage instead of the individual option?

Megan C :

That is correct

Customer:

So just so I'm clear, just trying to find out the best option. Are there benefits to going the Small Business Owners route on the ACA site, vs having my business stop paying premiums (then our health insurance is not covered by work) and then going for an individual plan on the ACA site? Hope that makes sense.

Megan C :

Yes, because you can still deduct the cost of your insurance.

Customer:

I guess what I'm trying to figure out is on the individual plan the insurance premium could be $800-900 with the tax credit for income level bringing it down into the $600 range. Is there a way to see what the premiums would be in the small business side for just one employee? If they're higher, or there's no tax credit like the individual plan, then yes the business deduction for the expense would help offset the difference, but would it be smarter to just go the individual route if it's less expensive overall. It seems that as an owner and self employed, there's no tax credit at all.

Megan C :

You would have to talk to insurance companies and get the quotes. I couldn't tell you if it were cheaper.

Customer:

Thanks for your help. Seems like the ACA doesn't help out the small business owner.

Megan C :

It actually did not. It's hurt businesses all the way around

Megan C :

It's even hurt employees...I know of one where her deductible is going from $350 a year to $1,200 per year

Megan C :

and her premiums are also going up

Megan C :

Its helped no one

Megan C :

There's nothing good that has come out of this legislation, in my opinion.

Customer:

And caused headaches for us who are trying to figure it all out. Thanks for your help.

Megan C :

You're welcome. Fingers crossed that when they revisit this in 90 days, something will be changed!

Customer:

What date are they revisiting it? I wonder if sign up options might change then or is that past the sign up deadline to begin coverage on Jan 1, 2014?

Megan C :

Well, Congress is arguing about it...there's no set date

Customer:

Okay. Thanks.

Megan C :

You're welcome

Megan C :

I wish I had more information for you. The legislation is an insane amoutn

Megan C :

of pages

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