Monday, June 27, 2016

How to Determine Average Annual Wages of Your Full-Time Employees

Whether or not you need to file Forms 1094-C and 1095-C is determined by your total number of full-time employees. The average annual wages you pay your employees also figures into your ACA compliance, so it’s important to be able to correctly calculate not only your total of full-time employees but their collective wages as well.

What is a Full-Time Equivalent Employee (FTE)?
A full-time equivalent employee (FTE) is an employee whose hours of paid service equal or exceed the 30-hour per week full-time standard for employees as outlined by the IRS. An FTE can be one employee who works more than 30 hours a week, or can be made up of two or more part-time employees whose combined hours exceed 30 hours.

Who is Considered an Employee when Determining FTEs and Average Annual Wage?
Generally, all of your employees will be taken into consideration when determining your FTE total and average annual FTE wages. This includes employees who terminated employment during the tax year, employees covered under a collective bargaining agreement, and employees not enrolled in your health care coverage.

Can I be Counted as an Employee if I Own My Small Business?
No. Additionally, the following individuals are not considered employees for the purposes of the credit:
  • Any other owners of the business, like sole proprietors, partners, or shareholders who own greater than 2% of an S corporation or 5% of a C corporation
  • Spouses of the owners
  • Family members of the owners, including children, grandchildren, [step] siblings, [step] parents, nieces/nephews, aunts/uncles, son/daughter-in-laws, father/mother-in-laws, brother/sister-in-laws
  • Spouses of family members of the owners

How is the Number of FTEs Determined?
To determine your FTEs:
  1. Add up the total hours of service you pay wages to employees during the year (not to exceed 2,080 hrs/employee).
  2. Divide that amount by 2,080.
  3. If necessary, round to the next lowest whole number. If your result is less than one, round up to one.
Example: An employer pays five employees for 2,080 hours each and three employees for 1,040 hours each:
  1. (5 x 2,080) + (3 x 1,040) = 13,520
  2. 13,520 / 2,080 = 6.5
  3. The employer has six FTEs

How are the Average Annual Wages Determined?
When determining the average annual wages, all wages paid to employees, including overtime, are taken into consideration:
  1. Add up the total wages you paid during the taxable year to your employees.
  2. Divide that by the number of FTEs you had during the year.
  3. If necessary, round your result down to the nearest $1,000.
Example: An employer pays a total of $224,000 in wages to employees and has 10 FTEs.
  1. $224,000 / 10 = $22,400
  2. The employer’s average annual wages are $22,000

E-filing with ExpressIRSForms
Parts of the ExpressIRSForms e-filing process for ACA forms include a full-time employee calculator and multiple error checks to ensure your return is ACA compliant. Create an account today to get started. If you need any help, you can give our customer support staff a call at (704) 684-4751 or send us a live chat Monday through Friday, 9:00 a.m. to 6:00 p.m. ET. We also provide 24/7 email assistance at

No comments:

Post a Comment