Jackson Hewitt® Reports that States Choosing Not to Expand Medicaid May Cost Their Employers Over $1 Billion in Federal Tax Penalties Annually

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Jan 22, 2014, 08:00 ET

PARSIPPANY, N.J., Jan. 22, 2014 /PRNewswire/ -- The connection between federal tax penalties and Medicaid expansions may not be clear to many, but these penalties could be costly to employers in states that do not expand Medicaid for adults. As a company keeping a close eye on the ACA roll-out and its implications for both businesses and individuals, national tax preparation firm Jackson Hewitt Tax Service® released a report on this topic entitled "State Medicaid Choices and the Hidden Tax Surprises for Employers."

The report explores how states that do not expand Medicaid leave their employers (with fifty or more full time equivalent employees) exposed to higher federal tax penalties under the ACA.

"In the 25 states that have opposed or remain undecided about expanding Medicaid for adults," said Brian Haile, senior vice president, Jackson Hewitt Tax Service Inc., "we estimate that employers may pay an additional $1.03 billion to $1.55 billion in federal tax penalties beginning in 2015."

By way of example, the decision in Texas to forego the Medicaid expansion may increase federal tax penalties on Texas employers by $266 to $399 million annual starting next year. Likewise, employers in Pennsylvania may pay $52 to $77 million dollars each year in federal tax penalties if the state does not expand Medicaid for adults.

The report concludes that state government efforts to limit Medicaid cost growth in and after 2017 (when states must begin to pay part of the cost of the Medicaid expansions) may actually lead to higher net taxes for employers in such jurisdictions beginning in 2015.

Haile notes that, "As some states are still evaluating their participation, it is critical that any projections of the 'net' costs of Medicaid expansions also reflect the very real costs of the shared responsibility penalties to employers in any particular state."

The report is available on Jackson Hewitt's public website.

About Jackson Hewitt Tax Service Inc.
Jackson Hewitt Tax Service Inc. is an industry-leading provider of full service individual federal and state income tax preparation, with approximately 6,500 franchised and company-owned locations throughout the United States, including locations in Walmart stores nationwide, and Sears stores in the United States and Puerto Rico in the 2014 tax season. Jackson Hewitt Tax Servicealso offers an online tax preparation product at www.JacksonHewittOnline.com. For more information, or to locate your neighborhood Jackson Hewitt office, visit www.JacksonHewitt.com or call 1-800-234-1040. Jackson Hewitt can also be found on Facebook and Twitter. Most offices are independently owned and operated.