Posts Tagged ‘Employer Tax Credits’

Small Business Health Care Tax Credit

Tuesday, January 25th, 2011

Health Care Tax CreditIf you are a small business and you pay at least 50 percent of your employee’s health insurance premiums, you may be eligible for a tax credit of up to 35% of the premiums you have paid.

On December 2nd, 2010, the IRS has released final guidance for small employers eligible to claim the new small business health care tax credit for the 2010 tax year. Today’s release includes a one-page form and instructions small employers will use to claim the credit for the 2010 tax year.

New Form 8941, Credit for Small Employer Health Insurance Premiums, and newly revised Form 990-T (draft) are now available on IRS.gov. The IRS also posted on its website the instructions to Form 8941 and Notice 2010-82, both of which are designed to help small employers correctly figure and claim the credit.

More About the Small Business Health Care Tax Credit
Included in the Affordable Care Act enacted in March, the small business health care tax credit is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have

The new guidance addresses small business questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multi-employer health and welfare plans, and employers that subsidize their employees’ health care costs through a broad range of contribution arrangements.

In general, the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

Small businesses can claim the credit for 2010 through 2013 and for any two years after that. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.

The maximum credit goes to smaller employers – those with 10 or fewer full-time equivalent (FTE) employees – paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year.

Important note: Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.

How to Claim the Tax Credit

  • If your business is eligible, use Form 8941 to figure the credit and then include the amount of the credit as part of the general business credit on your tax return.
  • Tax-exempt organizations must use Form 8941 to figure their refundable credit, and then claim the credit on Line 44f of Form 990-T. Though primarily filed by those organizations liable for the tax on unrelated business income, Form 990-T (draft) will also be used by any eligible tax-exempt organization to claim the credit, regardless of whether they are subject to this tax.

Links to Additional information:
Frequently Asked Questions
Affordable Care Act
IRS Notice 2010-82
Form 8941
Instructions to Form 8941
Form 990-T – Draft of 2010 Form
IRS Press Release

Contributed By:

The PCS Team

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional

Hire Act Update

Sunday, April 25th, 2010

 

Hire Act UpdateWe have received numerous updates from the IRS since the March Issue of PayNotes and continue to monitor the IRS website on a daily basis.  Included in the updates are:

  1. FAQ from IRS on HIRE
  2. New Form W-11 which is the Affidavit that employers must have the employees complete in order to comply with the regulations of the Act.
  3. The language of the Act itself.

We have been keeping our original article on HIRE updated with these new releases including the Wizard which can help you identify if any new hires qualify your company for the exemption.  To access the article, click here.

For our Clients, there are a number of steps that need to be taken in order to ensure the employer Social Security Tax exemption is computed and reported correctly.  PCS’s software is now updated to allow for the recording of HIRE Act events.  If you have a qualified new hire to setup, here is what you need to do:

  1. Be sure to have the employee fill out and sign the Affidavit (W-11 ). Retain these records and do not send them to PCS.
  2. Notify your Client Account Manager via email or phone that you have an employee to apply the credit code to. Your Client Account Manager will make the appropriate notations and will take care of the employee coding for you at this time.

Again, we will be keeping this page up to date as new information is available, be sure to check back on a regular basis or contact your Client Account Manager for any assistance!

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney or an HR Professional.