HR: Tax Credit for Small Businesses
The Affordable Care Act enacted by the Obama Administration earlier this year includes a small business health care tax credit. The credit is designed to encourage both small businesses and small tax exempt organizations to offer health insurance coverage to their employees.
The tax credit is targeted to businesses that employ moderate and lower income workers and contribute an amount equivalent to at least half of the costs of single coverage for their employees. It is available to small businesses with fewer than 25 employees, paying average yearly wages below $50,000. The credits are available for tax years 2010 through 2013 and for any two years thereafter.
The maximum credit is 35% of premiums paid by small businesses and 25% for tax exempt organizations. In general, the smaller the business the bigger the credit—companies with 10 or less employees will benefit the most. The White House estimates that 4 million employers will qualify for the credit?
A few weeks age, the IRS released guidance information to help eligible small employers claim this tax credit for the 2010 tax year. The new guidance addresses eligibility questions as well as a one-page form (Form 8941) and instructions for employers on how to claim their tax credit.
Whether employers are in favor or against the healthcare reform laws- they owe it to themselves to understand and take advantage of the laws, where possible.
For additional information about the healthcare tax credit, go to www.irs.gov.