MinistryCPA - Corey A. Pfaffe, CPA, LLC

On December 13, 2016, President Obama signed the 21st Century Cures Act, allowing qualified small employers to offer Health Reimbursement Arrangements (HRA) that follow certain terms. After the Affordable Care Act was passed, the IRS originally determined that an HRA was not a qualified group health plan. The Cures Act overrules this decision. HRAs are again an option for qualifying small employers. To be eligible, the small employer must have fewer than 50 employees and must not offer a group health plan to any of its employees. The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) must be subject to the following terms. No salary reduction contributions may be made (i.e., 100% employer-funded). Employer must receive proof of employee’s minimum essential coverage. Reimbursements must be for qualifying medical expenses. Reimbursements for any year cannot exceed $4,950 (or $10,000 for family coverage), which will be adjusted annually for inflation. Employer ...

Question: I expect to have health insurance coverage for some or all of this year. What form(s) should I expect to receive in January? Answer: More than likely you will receive one or more Forms 1095-A, 1095-B, or 1095-C. You will use the Forms 1095 to report your Minimum Essential Coverage on your tax return. What forms you receive will depend on where you received health insurance coverage and on your size of employer. You will receive Form 1095-A if you have coverage through the Federal or a State Marketplace.* You will receive Form 1095-B if you receive coverage from your employer who has fewer than 50 full-time employees or if you self-purchased coverage through the individual insurance market (not the Marketplace).* You will receive Form 1095-C if you receive coverage from your employer who has 50 or more full-time employees.* You should receive your form(s) each year by January 31. But certain employers could request a 30-day extension. Something ...

Question: What qualifies as a religious exemption from the shared responsibility payment that individuals must pay if they do not have qualified health insurance?  Answer: Those who have stayed current with our blog have educated themselves on the fee ("shared responsibility payment") they will have to pay on their 2014 tax return if they do not have minimum essential health insurance. In our October 28, 2014 post , we gave an overview of the exemptions from the "shared responsibility payment."  In our October 31, 2014 post , we discussed how health care sharing ministries offer the most common exemption that our readers may qualify for. A separate exemption, officially listed on HealthCare.gov , states that an individual does not have to pay the fee if the individual is "a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare."  Deciphering who qualifies for this religious exemption ...

Question: Is it legal to use a Section 125 cafeteria plan or Health Reimbursement Arrangement (HRA) to pay the monthly "premiums" ("share payments") of a health care sharing ministry? Answer: First, let's discuss what a cafeteria plan is... Generally, the terms "Section 125 plans" and "cafeteria plans" are synonymous. According to a page on the   IRS website , a cafeteria plan is a separate written plan maintained by an employer for employees that meets the specific requirements of and regulations of Section 125 of the Internal Revenue Code. It provides participants an opportunity to receive certain benefits on a pretax basis. Participants in a cafeteria plan must be permitted to choose among at least one taxable benefit (such as cash) and one qualified benefit. Second, let's discuss what an HRA is... An HRA is a tax-advantaged benefit that allows both employees and employers to save on the cost of healthcare. HRA plans are employ...

Over the past few weeks, we have written on the requirements to comply with the Affordable Care Act. If an individual does not have insurance that qualifies as minimum essential coverage, the individual will pay either a percentage of his or her household income or a flat fee -- whichever is higher. The figures below are taken from HealthCare.gov . 2014 Fee If you don't have coverage in 2014, you will have to pay the higher of these two figures:  1% of your yearly household income The maximum penalty is the national average premium for a bronze plan $95 per person for the year ($47.50 per child under 18) The maximum penalty per family who chooses to use this method is $285 2015 Fee If you don't have coverage in 2015, you will have to pay the higher of these two figures:  2% of your yearly household income The maximum penalty is the national average premium for a bronze plan $325 per person for the year ($162.50 per child under 18) The maximum penalty...

Question: According to HealthCare.gov, some individuals who don't have a qualified health insurance plan may be exempt from making the individual shared responsibility payment . I was reading the list of exemptions, and one of them stated an exemption for a member of a recognized health care sharing ministry. What is a recognized health care sharing ministry ? And what do I have to do in order to qualify for the exemption? Answer: A few days ago, we gave an overview of all the exemptions from the fee for not having health coverage. One of the exemptions we mentioned was based upon being a member of a r ecognized health care sharing ministry . According to HealthCare.gov, a health care sharing ministry is "an organization whose members share a common set of ethical and religious beliefs and share medical expenses among themselves in accordance with these beliefs." The most common health care sharing ministries are Samaritan Ministries and Christian Healthca...

Question: According to HealthCare.gov, some individuals who don't have a qualified health insurance plan may be exempt from making the individual shared responsibility payment . I was reading the list of exemptions from the penalty, and I noticed one of them was called a hardship exemption . What is meant by hardship ? And what do I have to do in order to qualify for the exemption? Answer: Yesterday, we gave an overview of all the exemptions from the fee for not having health care coverage . One of the exemptions we mentioned was based on hardship . Below are just a few of the circumstances that may qualify you for a hardship exemption. If you would like to know all 14 circumstances of hardship that might qualify an individual to be exempt from the fee, you can read the list at HealthCare.gov. You received a shut-off notice from a utility company You filed for bankruptcy in the last 6 months You experienced unexpected increases in necessary expenses due to caring...

The "shared responsibility payment" started in 2014, which means that every person needs to have health insurance or make a payment (a nice way of saying a fee) on his or her federal income tax return. However, HealthCare.gov lists some exemptions that may allow individuals to avoid making this payment . Below, we have broken down the various exemptions while describing the different ways to apply for them. Several of the exemptions can be claimed in one of two ways: (1) either when you file your federal tax return for the year or (2) when you apply for the exemption early through an application form. The following exemptions can be claimed by either of the two options previously described: Exemptions based on coverage being unaffordable Exemptions for membership in a health care sharing ministry Exemptions for membership in a federally-recognized tribe Exemptions for being incarcerated The following three exemptions can only be claimed in advance through an applica...

Question: Our church is thinking about acting as a missions agency by directly supporting some missionaries. Do you see any concerns with doing this? Answer: In the past, we have provided blog posts concerning how churches have chosen to serve as missions agencies. Recently, however, we have deepened our research and discussion concerning this complex topic. Our research and experience has provided some additional cautions about a church taking on the responsibilities of a missions agency.  Regulations for missionaries continue to become more complex. Unless a church is willing and able to thoroughly research and act in accordance with these regulations, we strongly discourage churches from acting as missions agencies. We fear that either the church or the missionary will not have the expertise to comply with the law.  Recently, the following topics have added to that complexity: Affordable Care Act Foreign Bank Account Reports (FBARS) Payments to foreign nationa...

Question: Our church is a small employer. We currently offer health benefits to two of our pastoral staff. How does the Affordable Care Act affect our church beginning January 1, 2014? Answer: The Affordable Care Act (ACA) market reforms will affect almost all employers who provide health benefits to their employees. Each small employer must wisely plan for the changes effective January 1, 2014. MinistryCPA has researched the ACA on behalf of its small-employer clients in consideration of the organizational and business situations under which they operate. Because each small employer is unique, MinistryCPA works with small employers on a client-by-client basis.

Question: Our church has filed for the Small Business Health Care Tax Credit since 2010. Are there any changes in this credit for 2014? Answer: Yes, the IRS has released proposed regulations that will change the requirements for any small business or eligible tax-exempt organization desiring to claim the credit.   The proposed regulations include the following: The employer must obtain and pay premiums through a Small Business Health Options Program (SHOP) Marketplace, which is an exchange to be established under the Affordable Care Act for small businesses. The maximum credit increases for small businesses to 50% (from 35%) and for eligible tax-exempt organizations to 35% (from 25%). There is a two-consecutive year filing limit beginning with tax year 2014. Meaning, if the employer files for 2014 and 2015, the employer may not file for 2016. Claiming the credit for prior periods (2010 through 2013) is not included in the two-consecutive year filing limit. Transition...

Question: A church supports various ministries. If a check is written to a ministry (a tax-exempt organization), does a church issue a Form 1099-MISC to that ministry. The church leaders understand that it is to issue Form 1099’s when it compensates individuals in a ministry. The posted question concludes: "The only thing we can find is that in general we do not have to issue a Form 1099 to a corporation." Answer: One of the exceptions to required reporting of payments listed in the 2010 instructions for Form 1099-MISC is "payments to tax-exempt organizations." Therefore, payments to a ministry are not reportable. Churches that pay rent, services, etc. to individuals who are not employees (they receive Form W-2) must file Form 1099-MISC. Thanks to the Patient Protection and Affordable Care Act of 2010... Regarding the last sentence in the above Question, beginning with payments in 2012, for-profit corporations that are paid by the church for rent, s...