On June 29, 2015 USA President Obama signed the African Growth and Opportunity Act that contains provisions for doubling financial penalties on USA employers found by the IRS to be in non-compliance with employer required reporting related to the Affordable Care Act (ACA). These penalties cover reporting requirements for Forms W-2 and 1099, and now more recently to forms associated with the ACA: forms 1094-B, 1095-B, 1094-C, and 1095-C. As a business owner, you know about those… right?
More Money Extracted from America Businesses
What does the IRS and ACA have to do with helping out Africa? Well nothing of course. Rules in the US Congress require that acts requiring funding must also have provision that identifies the congressional revenue source targeted to cover the expenditure. In other words, if they are going to give goodies to somebody, they have to show they can take it from someone else. That means that the law will be “revenue neutral”. In this “Act” Congress is providing funding to African countries (and the African business owners who will profit). To be “revenue neutral”, they have to identify someone who they are taking the money from and in this case it will be small and medium sized business across the USA.
ACA Fines and Penalties
In addition to adding significant taxes to small and medium businesses, the ACA has created a morass of nearly indecipherable rules, laws, penalties and schedules. Since many business owners are confused or unaware of their obligations under the ACA, what better way to get their attention than to increase the penalties for non-compliance?
Here are some changes to the ACA penalty amounts buried in the African Growth and Opportunity Act (Congress would prefer you call it the “Trade Preferences Extension Act of 2015”).
|Description||Old Penalty Amount||New Penalty Amount|
|Penalty for filing incorrect returns (per return)||$100||$250|
|Penalty for incorrect returns if corrected within 30 days (per return)||$30||$50|
|Penalty for incorrect returns if corrected by August 1
|Penalty for intentionally disregarding to file timely and correct returns||$250||$500|
|Maximum penalty per calendar year||$1,500,000||$3,000,000|
|Maximum penalty per calendar year if corrected within 30 days||$250,000||$500,000|
|Maximum penalty per calendar year if corrected by August 1||$500,000||$1,500,000|
Source: McDermott Will & Emory
To those paying attention (not including the US Congress)
- USA new business formation has been and remains at record lows.
- Small businesses generate the majority of all the private sector jobs in the USA
- Workforce participation is at record lows
- GDP growth is anemic
- Rules and regulations for employers are ever expanding
- Minimum wage laws are expanding and will impact hiring
- EBT / Food stamp usage is at record levels
Now that the federal government is increasing penalties for businesses, is anybody asking if this really a recipe for small business growth? Evidently not. Once again stealth lobbying organizations have successfully pushed congress to pass a law to gain advantage for their client companies (even non USA companies). This is directly at the expense of American business owners. It’s odd, but I don’t recall anybody asking American businesses for their input on being the target of the shakedown in this agreement.
Now more than ever, business owners need to partner with a Professional Employer Organization who will work to assure their company’s regulatory compliance.
image source: CNN