Obamacare and the Self-Employed

Phil Cohen

Sole proprietors, including owner-operators, will join the ranks of individuals required to purchase health insurance under the rollout of the Affordable Care Act. For many who have not purchased insurance previously, navigating the options and requirements is tricky but crucial to avoid unnecessary tax penalties.

There are several options available for the self-employed. The first, of course, is to maintain the status quo: keep the insurance you have, or choose not to purchase insurance if you are not already covered. Each of these comes with its own caveats, however. Your current insurance may not meet the requirements for health care plans under the ACA, in which case you will still be required to purchase insurance. If your plan was grandfathered in, you may have coverage for pre-existing conditions.

On the other hand, opting out of health insurance will subject you to the same penalty other individuals must pay: the greater of $95 or one percent of your taxable income for 2014, increasing to the greater of $695 or 2.5 percent of your taxable income in 2015. You are exempt from the individual mandate if you would qualify for Medicaid under the new legislation, even if your state did not expand Medicaid eligibility.

The second option is to purchase insurance, either through the marketplace or using a broker. A broker will have better perspective on the market and can give you appropriate counseling to choose the type and level of coverage that would best serve you. Unfortunately, you will not qualify for federal subsidies, if you are otherwise eligible, unless you purchase through the federal exchanges. The exchanges offer the opportunity to compare coverage side-by-side, and all available plans include the minimum essential benefits set forth by the ACA.

A particular complication for sole proprietors purchasing individual health coverage is the uncertainty of quarterly and annual income. Health care subsidies are tied in to income taxes, so overestimating your income can incorrectly disqualify you from receiving subsidies while underestimating earnings will mean a larger tax bill to repay subsidies at tax time.

Finally, you can incorporate and hire at least one full-time employee. Companies employing at least one but fewer than 25 full-time employees are considered “micro-businesses” and are exempt from the employer mandate. In addition, having an employee qualifies you for tax subsidies available on the Small Business Health Options Program (SHOP) marketplace for your state and can make providing health care  even more affordable.

An owner-operator’s livelihood depends on the ability to stay on the road and deliver loads in a timely fashion. If you do not have health insurance, you may be vulnerable to illness or catastrophic injury that can take you off the road and threaten your business’s survival. Factoring for owner-operators is an ideal solution that gives you immediate access to cash that you can use to purchase viable health care, keep more money in your pocket at tax time, and keep you hauling.

Find out more about EZ Invoice Factoring’s owner-operator truck factoring program, and contact us to receive a proposal today.

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Phil Cohen

Phil is the owner of PRN Funding and sister company Factor Finders. He has been an authority in the factoring industry for over 20 years, serving on the board of directors for several factoring associations.

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