A week or so ago I received an e-mail from a client saying two employees who previously had tax refunds in prior years had not much returned when filing their 2014 return and thought it had to do with us as a payroll company. This client switched payroll providers to us for their 2014 processing and the employees thought this reduction in their refunds was due to how we processed the payroll which was apparently less friendly to them than the other payroll company.
My response was that tax deductions are determined by how much is earned and how the employee claims on their W4. But I also asked the employer if the employees had medical insurance. If not, they had to pay the individual shared responsibility payment for the Affordable Care Act. This tax was implemented in 2014, so if they failed to have coverage, they had to pay a fee.
I wrote about this upcoming tax payment in a prior blog (affordablebookkeepingandpayroll.com) and you can read how this tax is calculated in that post.
Many individuals or families may be surprised when they owe more tax, or receive less of a refund than in the past. To avoid this amount due on your tax return, you must have minimal essential coverage. February 15th was the enrollment deadline for 2015, so unless you have a reason why you can enroll now (marriage, child, job change, etc) this tax will also be due on the 2015 tax return.
If you have questions about this tax or need help with understanding the Affordable Care Act, talk with a professional in this field. I’m happy to refer those I know in CA who provide this service, so reach out if you don’t already have a contact.
I hate to be the bearer of bad news when it comes to additional taxes, but by sharing this information, at least you can be informed and know what to expect come tax time.
