The Internal Revenue Service has released final guidance on the new small business health care tax credit, created by the passage of the Affordable Care Act last March. Form 8941, used to claim the credit, was released December 2, along with instructionsand a Noticeproviding more detailed information. Eligible taxpayers are those that meet all three of the following criteria:
- They paid premiums for employee health insurance coverage under a qualifying arrangement;
- They had fewer than 25 full-time equivalent employees (FTEs) for the tax year, and
- They paid average annual wages for the tax year of less than $50,000 per FTE.
The credit, available to small employers, both taxable and tax-exempt, may be claimed for 2010 - 2013, and for any two years after that. The maximum credit for tax-exempt employers is 25% of premiums paid. Beginning in 2014, the maximum credit will rise to 35% of premiums paid for tax-exempt employers. Note that there is a credit phase-out for employers with more than 10 FTEs and average wages of more than $25,000 -- each of these limitations may separately reduce the credit. Other limitations may apply -- refer to Form 8941 instructions for more information.
Tax-exempt employers will claim the credit by filling out Form 8941 and filing it with Form 990-T for 2010 and forward. The credit may be even if Form 990-T is not otherwise required to be filed for the year.
For more information:
IRS News Release: http://www.irs.gov/newsroom/article/0,,id=231928,00.html?portlet=7
IRS FAQ: http://www.irs.gov/newsroom/article/0,,id=220839,00.html
Form 8941: http://www.irs.gov/pub/irs-pdf/f8941.pdf
Form 8941 instructions: http://www.irs.gov/pub/irs-pdf/i8941.pdf
Form 990-T (DRAFT): http://www.irs.gov/pub/irs-dft/f990t--dft.pdf
Notice 2010-82 (more info): http://www.irs.gov/pub/irs-drop/n-10-82.pdf
IRS Affordable Care Act page: http://www.irs.gov/newsroom/article/0,,id=220809,00.html