New Trade Law Increases Tax Information Penalties and Reinstates Health Care Tax Credit (article)
On June 29, 2015, President Obama signed the Trade Preferences Extension Act of 2015 (Public Law No. 114-27). Following are two topics of interest to employers contained in this new law.
Increase in Tax Information Reporting Penalties
The Internal Revenue Service can assess penalties when certain tax information is not provided on a timely basis. Specifically, penalties may be assessed for failure to file information returns or provide payee statements, such as the Form W-2 and Form 1099, and notably, the newly imposed Affordable Care Act’s Forms 1094 and 1095, or related payee statements. The new Trade law increases these penalties, as follows:
- The penalty for failure to file an information return increases from $100 to $250 for each return for which such failure occurs. The total penalty imposed for all failures during a calendar year increases from $1.5 million to $3 million.
- The penalty for failure to provide a correct payee statement increases from $100 to $250 for each statement with respect to which such failure occurs, with the total penalty for a calendar year not to exceed $1.5 million.
Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to furnish a payee statement.
These increased penalties become effective January 1, 2016, meaning for returns due in early 2016 for the 2015 tax year.
Reinstatement of Health Care Tax Credit
The Health Care Tax Credit (HCTC) was initially placed into law by the Trade Act of 2002. The purpose of the HCTC was to provide premium assistance in the form of a tax credit, equaling 72.5% of COBRA premium paid by individuals who lost jobs due to foreign trade-related agreements. The HCTC expired on December 31, 2013.
The new Trade law not only reinstates the HCTC through 2019, but it also provides for retroactive certifications from when the program expired on January 1, 2014. In addition, the new law makes changes to the group eligibility requirements and individual benefits and services available under the Trade Adjustment Assistance (TAA) program since January 1, 2014.
The Department of Labor’s Employment and Training Administration website provides additional information about the reinstatement of the HCTC, as well as information relating to reconsideration of previously denied petitions and certification processes as a result of the new law.
The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.