Small businesses can claim new health care tax credit in 2010

A look at the IRS’s new guidelines for eligibility …

Earlier this month, the IRS released the final guidelines for small employers and tax-exemptorganizations that are eligible to claim the new small business health care tax credit for the 2010year.

The small business health care tax credit is designed to encourage small businesses and tax-exemptorganizations to offer health insurance to their employees for the first time or maintain the coveragethey already have as part of the Affordable Care Act enacted in March.

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

To Be A Qualified Employer:

  • The employer must have fewer than 25 full-time equivalent employees (“FTEs”) for the taxyear
  • The average annual wages of its employees for the year must be less than $50,000 per FTE
  • The employer must pay the remiums under a “qualifying arrangement”

For Small Businesses:

  • Credit can be claimed 2010-2013 and for any two years after
  • For tax years 2010-2013, the max credit is 35% of premiums paid
  • Beginning in 2014, the max tax credit will increase to 50% of premiums paid
  • Eligible businesses will use Form 8941 to figure the credit and include the amount of thecredit as part of the general business credit on its income tax return.

For Tax-Exempt Organizations:

  • Credit can be claimed 2010-2013 and for any two years after
  • For tax years 2010-2013, the max credit is 25% of premiums paid
  • Beginning in 2014, the max tax credit will increase to 35% of premiums paid
  • Tax-exempt organizations will use Form 8941 to figure their refundable credit, and thenclaim the credit on Line 44f of Form 990-T.
  • Form 990-T is primarily filed by organizations that are liable for the tax on unrelated businessincome. In this instance, it will also be used by any eligible tax-exempt organization to claimthe credit, regardless of whether they are subject to this tax.

Form 8941, Credit for Small Employer Health Insurance Premiums, and the revised Form 990-Tare now available online on IRS.gov to help navigate the forms, the IRS has also posted instructions on its website to help small employers figure the claims correctly.

Click on these links for Form 8941and Notice 2010-82. More information about the credit, including a step-by-step guide to claiming the credit is available on the Affordable Care Act page on IRS.gov.