Q&A: Tax Credits for Employers Providing Insurance | Small ...

Tax Credit Questions ? Solved
By:Pearl Dahmen Para, CPA, MA, CBA

Q: What is this credit and how will it help small business owners?

The Affordable Care Act has several provisions designed to help health insurance become more affordable and accessible to all Americans, however this is not the primary benefit to small business owners.? The primary benefit, aimed at encouraging small business owners to provide insurance for their employees while elevating some of the cost, is the Health Care Tax Credit.?

Starting in tax year 2010, small business employers received a credit of up to 35% of premiums paid.? In 2014, this will increase to 50%. ?

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Q:? How I can take advantage of this credit?

To be eligible you must meet the following criteria:

• Fewer than 25 full-time equivalent employees (this means you can have more than 25 part-time employees if all of their hours would equate to less than 25 full-time employees)
• Employee average annual wages must be less than $50,000 (This is a simple average.? All the annual wages divided by the number of employees.? If you have one high paid employee and the rest are under $50,000, but this high wages make your average over $50,000, you will not qualify)
• Contribution of 50% of the health insurance premium (This is 50% of the individual?s premium.? If you are paying a percent of a family policy that equates to less than 50%, but is more than 50% of a single premium, you do qualify)

Q: So, you qualify. How do you claim the credit??

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The credit is claimed on tax Form 8941 (a new form) attached to your annual business tax return.? A CPA or tax accountant will be able to assist you in its preparation.

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Q: How much will the credit be?

Use this online tax credit calculator at:? http://smallbusinessmajority.org/tax-credit-calculator/

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Q: What if I was eligible in 2010, but didn?t claim my credit?

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No need to worry, you are eligible to file a correction.? A CPA or tax accountant will be able to assist you in preparing a corrected tax return.

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Q: Is there anything else I need to know about the Small Business Healthcare Tax Credit?

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There are a few additional restrictions and guidelines for small business owners to follow:

• Seasonal employees do not count in determining edibility.
• The law explicitly excludes sole proprietorships and family members from the small business tax credit. If you fit into either exclusion, you are eligible to file for the individual tax credit.? It is an employee related credit, owner premiums are not included.
• Small businesses that take the credit still maintain full deductibility of the cost of health insurance.
• This is not a refundable credit.? It can only reduce taxes.? If your credit is greater than the taxes you owe, you will be eligible to carry it back or forward to receive the benefit.

Q: What if I have more questions?

The SBDC at USF has two CPAs on staff that can answer additional questions. Make an appointment to discuss the details of your situation.

Source: http://www.sbdctampabay.com/qa-tax-credits-for-employers-providing-insurance

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