Financial Planning for Businesses

Is Your “Obamacare Strategy” A One-Way Ticket To Audit Hell?

The health care industry is about to be run like the DMV – it’s disgusting. Like your current insurance broker? Doesn’t matter. Don’t like him? That doesn’t matter either. Want him to help you navigate the complexities of the Affordable Healthcare Act? Good luck – your insurance broker could be your best friend but he’s not a tax law expert. Advice is almost always worth what you’re willing to pay for it. If you’re a cheapskate, and the price is “free,” you’re probably buying a one-way ticket to audit hell.

Obamacare-routes of escape cut off

Even if you’re willing to pony up some dough for a legal and tax strategy, it doesn’t guarantee success. You have to hire the best accountants and tax professionals in the industry – the “top guns.” They may not be the biggest companies you’ve ever heard of (they usually aren’t), and they only take on clients willing to pay top dollar (which is why they remain small – most business owners are willing to pay for good legal advice, but they aren’t willing to pay for exceptional legal advice).

Oh, while we’re on the topic, don’t even think about using these strategies to dodge Obamacare:

The Independent Contractor Trick

A lot of companies are trying this one right now. I understand the reasoning behind this tactic, but you’re playing Russian roulette with your business by trying it – at least in the way 99 percent of companies are going about it. Just because you issue a 1099 to your “employee” doesn’t make him an independent contractor. The IRS can reclassify your “contractor” so quickly it will make your head snap. Then, you’ll be facing fines, penalties, and the cost for insurance that the IRS thinks you should have paid from the very beginning.

In Nationwide v. Darden, the Supreme Court ruled that an employee, under ERISA should be classified as such:

In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party’s right to control the manner and means by which the product is accomplished. Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.

Will courts automatically rule that the definition of an employee under ERISA is the same definition that will be applied to the ACA? It’s not for certain, but it looks like the IRS is moving to cut business owners off at the pass. It warned that it would institute an “anti-abuse” rule to combat those who try to violate the “spirit” of the law. This time, it looks as though the agency is serious. The Treasury inspector general announced that the IRS would require an additional 2,000 employees to monitor compliance with the mandate in its Sept. 30 report.

The IRS is looking to scrutinize reclassifications:

In late 2011, the IRS vowed to be more vigilant in finding employers who improperly label workers as independent contractors. At the same time it launched an amnesty program for employers to voluntarily reclassify workers in exchange for a reduced payment to cover back taxes.

Cutting Your Employees’ Wages

“I know,” you say, “I’ll just cut back my employees’ hours or wages. That’ll allow me to run my business and get around this Obamacare nonsense.” Not so fast. According to CNS News,

The agency specified that employers could still fall under the mandate if they employ enough part-time workers to equal 50 full-time workers. For example, if an employer has 40 full-time workers and 20 part-time workers, that employer would be considered by the government to have 50 full-time workers and would be subject to the mandate because the 20 part-time workers average to 10 full-time workers – meeting the 50 full-time-worker threshold.

Awe, shit. They got ya. No matter, you’ll contact your local accountant. He must have some cute tricks up his sleeve, right? I mean, all CPAs know how to dodge tax laws, and we already know now that the mandate is, in fact, a tax – thanks to the epic Supreme Court ruling on the matter.

Anything That Looks “Cute”

The IRS is gearing up to hire 2,000 or so more agents to enforce the law. I wouldn’t try to get “cute” with the government. They have more guns than you do, and they can bury you in paperwork using lawyers (and paper) that you pay for through taxes. How’s that for some sand in the eyes? Seriously, if you try anything that violates the “spirit” of the law, there’s a chance that you might get a knock on your door:

The Treasury Department and the IRS are aware of various structures being considered under which employers might use temporary staffing agencies (or other staffing agencies)… to evade application of section 4980H [the employer insurance mandate].

While I think a strong financial, tax, and legal plan might be able to protect you, it’s not going to be easy. On top of that, it’s going to be expensive. What’s your plan?


April 26th, 2013 | by David | No Comments

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