Millions of small employers received postcards from the IRS beginning in April 2010 that alerted them to the new small business health care tax credit and encouraged them to check their eligibility. Even if you didn't receive a postcard, your organization still may be eligible.
To be eligible for the credit, a qualifying employer must cover at least 50% of the cost of health care coverage for some of its workers, must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible), and must pay average annual wages below $50,000.
The credit is worth up to 35% of a small business' premium costs in 2010 and up to 25% of a tax-exempt employer's premium costs. On January 1, 2014, this rate increases to 50% (35% for tax-exempt employers).
The credit phases out gradually for employers with average wages between $25,000 and $50,000 and for employers with the equivalent of between 10 and 25 full-time workers.
To determine if your organization qualifies for the small business health care tax credit, follow the three simple steps on the IRS fact sheet located at http://www.irs.gov./pub/irs-utl/3_simple_steps.pdf.
Small employers, whether for-profit or tax-exempt organizations, should use new Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the small business health care tax credit.
Tax-exempt organizations will include the amount of the credit on Line 44f of revised Form 990-T, Exempt Organization Business Income Tax Return. Form 990-T has been revised for the 2011 filing season to enable eligible tax-exempt organizations--even those that owe no tax on unrelated business income--to claim the small business health care tax credit.
For more information, please feel free to contact us.
This tax credit is also a provision of the Patient Protection and Affordable Care Act.