Small Business Tax Credit for Health Insurance Premiums under the ACA
Believe it or not, there is a tax credit for small (really small) businesses that pay for employee health insurance premiums. It can be claimed for years 2010 forward and for 2014 and 2015. This credit was enacted as part of the Affordable Care Act tax provisions (“ACA”) (otherwise known as Obamacare).
So how do you know whether or not you qualify for the tax credit. Because part of the mission of Internal Revenue Service is “service” there is a web page on their site that addresses this in detail: “http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small- Employers” for details. This site also includes a link to an “estimator” to determine if you qualify. The estimator is found on the Taxpayer Advocate site at: “http://www.taxpayeradvocate.irs.gov/calculator/SBHCTC.htm”.
To receive the credit, file on Form 8941or Form 3800 depending on type of entity and amend your return for prior years to make this claim. If you qualify, the credit can be as high as 35% (50% in 2014 and 2015) of the premiums paid on behalf of employees. It is a refundable tax credit, meaning that you get it even if you owed no tax. It is available to tax exempt organizations as well.
You must have fewer than 25 full time employees or equivalent (part time may count as one-half or less meaning there may be more than 25 people employed) (“FTEs”) (“owners” do not count in this number), pay an average (to such FTEs) wages of less than $50,000 (“owners” do not count in this calculation), and pay at least one-half of the qualified group health insurance premiums for the FTEs.
IF YOU QUALIFY, your filing deadline for 2010 may be March 17, 2014 (corporations and S corporations), or April 15, 2014 for Partnerships (LLC included) and sole proprietors. To be more certain of how this may apply to your circumstances, we are happy to discuss it with you or your accountant. If you want to do your own research, additional guidance on the credit is available in Notices 2010-44, 2010-82 and Notice 2014-6. Find guidance for the 2014 changes in REG-113792.