December 4, 2010

The Internal Revenue Service has just published final forms and instructions for calculating and claiming the new small business health care tax credit that was enacted earlier this year as part of the Patient Protection and Affordable Care Act. If your business qualifies, you can utilize this credit for the 2010 tax year.

The new one-page form (Form 8941 - Credit for Small Employer Health Insurance Premiums) is now available on the IRS website (www.irs.gov) along with the instructions to Form 8941 and Notice 2010-82, both of which are designed to help small employers correctly figure and claim the credit.

The tax credit can be substantial – 35% of the health care costs that you pay for your employees. To qualify for the full credit, a business must have fewer than 25 employees, pay average annual wages below $50,000 (not counting owners’ salaries) and pay at least 50% of the premium for their employees’ coverage. Beginning in 2014, the credit increases from 35% to 50%.

The credit was designed to encourage small employers to start or maintain health insurance coverage for their employees. Nationally, the percentage of small employers offering health insurance has been declining steadily over the past decade. For more information on the tax credit, other aspects of health care reform or health insurance options for your business contact us.