Small Business Tax, Healthcare, and Compliance: Concerns and Solutions

Despite small to medium-sized businesses being the “lifeblood” of the American economy, it seems that there is no end of challenges being imposed upon them. In this article we’ll discuss some of the new policies, legislation, and practices that could present potential challenges to small and medium-sized businesses (50 – 100 workers) and strategies for dealing with these obstacles.

Affordable Care Act

In a recent article published by a local California newspaper, the challenging and sometimes contradictory nature of the Affordable Care Act’s legislation for small business is described.

“The Affordable Care Act has many different definitions of small business. They’re inconsistent with one another,” says David Chase, California director of the Small Business Majority advocacy organization.

For small, oftentimes family-run businesses, they are concerned with the primary task of doing their business or trade, and not running it from a HR, logistical standpoint. Because of this, many of these businesses are put under additional financial strain to outsource help with insurance and other human resource needs. The cost of not complying with the Affordable Care Act is substantial enough to give pause and motivate small businesses to seek help. Here are two new things to keep in mind when seeking a route to compliance.

Employer Mandate

Beginning on January 1st, 2016, the businesses required to provide legally defined affordable coverage to their employees (or risk penalization) is dropping from businesses with 100 employees to businesses with 50 employees. This will require employers to provide insurance to at least 95% of their full-time employees and their children. The fines for non-compliance have the potential to reach the tens of thousands of dollars, so it’s important to establish with certainty your specific business’s health insurance requirements. See this infographic by the Kaiser Family foundation for more information.

Definition of “Small Business”

Since the definition of small business is changing from 100 or fewer employees to 50 or fewer employees, many of these newly considered small businesses will have to purchase new plans to meet the standards. It’s crucial that you evaluate where you stand.

Small Business and Taxes

Getting all the tax breaks you can, while avoiding any potential fines, is crucial for small businesses. Accounting Today has compiled a list of 25 tips for helping small businesses deal with their taxes, a few of which we will restate here.

  1. Keep good records of who is an “employee” and who is an “independent contractor.” This is important when audits come around. You don’t match taxes for independent contractors, offer them benefits, or offer any insurance. They must take care of these things independently and you pay them per job instead of by the hour or salary.
  2. Invest in good tax software accounting systems—systems that track records and regularly provide up-to-date information on new IRS rules and regulations.
  3. Keep records on how much employees spent on expenses like business equipment, vehicles, lunches, etc. These can most likely act as a tax deduction.
  4. Err on the side of caution when estimating your yearly taxes. Make certain that you have sufficient funds set aside to pay your taxes on time, or at least file for the necessary extensions if needed.
  5. It is recommended that small business owners consult a tax expert who know all the rules and nuances of small business tax law.

Small Business Compliance Concerns

There are several laws which small businesses should be aware of and compliant with. Failure to do so could result in substantial fines and possibly even law suits. Trinet, a blog for entrepreneurs, offers their take on some compliance problems facing small to medium-sized businesses. See the full article here.

The Equal Employment Opportunity Commission (EEOC), has published a finding that race and sexual discrimination are the top most prevalent forms of workplace discrimination. But less than 25% of businesses provide training for recognizing and avoiding racial and sexual harassment.  Additionally, more than half of new hires leave their jobs within the first 6 months—opening the floodgates to wrongful termination lawsuits.

Yet despite the possibility of being sued, small business owners are not directly addressing the problem.  For example, only 23% of small businesses provide employment discrimination and/or sexual harassment training (based on a random survey of 300 privately held businesses conducted by Chubb Group of Insurance Companies).

Employee turnover contributes to employer liability by creating potential wrongful termination cases.  Studies show that a company’s legal costs in a wrongful termination lawsuit can run up to $85,000 and that winning plaintiffs receive judgments averaging $500,000.

To avoid this situation, make sure that you give employees the proper training on how to conduct themselves in the workplace. To learn more about increasing organizational efficiency, fill out the form on this page to have one of our experts contact you.

By | 2016-12-15T11:59:03+00:00 December 21st, 2015|
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