IRS Threatens Employers

Commentary from Twila Brase, President CCHF


January 16, 2013


The gloves are coming off. We're 11 months from full implementation and the real-world impact of Obamacare is hitting the newswires. Taco Bell and Wendy's just cut the hours of hundreds of employees to avoid the Obamacare employer health insurance mandate. These workers will not only not have health insurance, they will have less money to pay for it and may be forced into Medicaid under the individual mandate.

Now, the Internal Revenue Service is warning employers not to avoid the employer mandate. The IRS issued a 144-page notice which says they will soon issue proposed regulations with "anti-abuse rules."
This means penalties. The IRS intends to penalize any employer who dares to follow the law by finding the Obamacare's legal loopholes and employing perfectly legal tactics to avoid its penalties. These legal tactics are nothing new. But President Obama doesn't like it so he's called out the IRS bloodhounds.
In fact, nothing in the Obamacare law says employers can't cut hours, re-hire, split companies into separate legal entities to shrink the size of the company to the requisite penalty-avoiding 49 employees, or use temporary agencies. As the National Federation of Independent Business (NFIB) states, "A business can avoid the penalties by firing employees, by not hiring new ones, by replacing full-timers with part-timers, or by outsourcing."
In addition, because Obamacare defines "full-time" as 30 hours/week, employers have good reason to cut the hours of workers to 29 hours a week, which is exactly what Wendy's and Taco Bell have done. But the IRS hopes to shut down these legal maneuvers through regulatory overreach. 
Employers face two penalties under Obamacare. First, Obamacare requires employers with 50 full-time employees or more to offer "minimum essential coverage" or pay a fine of $2,000 per employee (minus the first 30 employees). Thus for a mid-sized restaurant that does not offer insurance, going from 49 to 50 employees will cost the restaurant $40,000, says the NFIB.
Second, if the employer does offer health insurance but even one employee opts to buy government-subsidized insurance on Obamacare's government Exchange, the IRS is notified and the employer must pay a $3,000 penalty per subsidized employee or $2,000 per employee (minus the first 30), whichever is less. 
The IRS Notice states:
"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) evade application of section 4980H [the employer mandate]. 
In other words, as reported by, if an employer hires someone part-time, then uses an employment agency to bring the same person on for a second part-time shift, the IRS will still hold the employer liable under the Obamacare mandate. This new penalty would be outside the law.
Is the IRS going rogue? Perhaps the NFIB, whose last Obamacare lawsuit ended up freeing states from the Medicaid mandate, should begin cooking up another lawsuit against Obamacare. Seems like a mighty fine idea.
In freedom,
Twila Brase RN, PHN
President, CCHF

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