In Washington D.C. back on September 7th, The Internal Revenue Service released the draft version of a form that will allow certain tax-exempt organizations and small businesses to calculate health care tax credits when it comes time to file income tax returns. The credit can be claimed beginning in 2010. Tax-exempt organizations that are eligible will be allowed to claim the credit during the 2011 tax season.
Though the final version of the form, Form 8941, will not be ready until later this year, The IRS has posted a draft version of the form on its website. This will allow for both small businesses and tax-exempt organizations can calculate the credit they can expect. The amount disclosed on Form 8941 will then be included as part of the general business credit on the business or organization’s income tax return or Form 990-T, the tax form used by tax-exempt organizations to document unrelated business income. In 2011, the Form 990-T will be revised to include the claiming of small business health care tax credit.
The Affordable Care Act signed by President Obama in March included the small business tax credit on healthcare. The hope is that the act and the tax credit will drive small business employers to consider offering their employees some type of health insurance coverage or to continue using the coverage the company’s workers already have in spite of the recent economic woes and cutbacks.
The credit is offered to employers whom meet certain criteria and only particular expenses apply. When an employer is deemed “qualified” will be eligible: 1) the employing agent must have fewer than 25 employees considered full-time; 2) average salary per full time employee does not exceed $50,000; 3) premiums must be paid under a “qualifying arrangement” by the employer.
The tax credit is designed to entice small business employers to offer healthcare coverage to their primarily lower to moderate income workers. The maximum that the credit covers however is 35 percent (its 25 percent for non-profits). The max tax credit will go up to 50 percent in 2014.