Claiming New Health Care Tax Credit: Draft Form 8941
On September 7, 2010, the Internal Revenue Service released a draft version of the form 8941 that small businesses and tax-exempt organizations will use to calculate the small business health care tax credit when they file income tax returns next year.
The small business health care tax credit was created as part of the Affordable Care Act. In 2010, the credit is generally available to small business employers that contribute an amount equivalent to at least half the cost of single coverage towards buying health insurance for their employees. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. Beginning in 2014, the maximum tax credit will go up to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible, tax-exempt organizations for two years.
The maximum credit goes to smaller employers, defined as small businesses that employ ten or fewer full-time equivalent (FTE) employees, paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Because the eligibility rules are based in part on the number of FTEs, and not simply the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals.
The final version of Form 8941 and its instructions will be available later this year.