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IRS Patrol: IRS Provides Help For Small Employers Eligible to Claim the Small Business Health Tax Credit for the 2010 Tax Year.
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Help is always nice to get – specially with all the new tax rules out there – and more on the way. I can hardly keep them all straight. If you are wondering if you qualify for this credit read on.
WASHINGTON — The Internal Revenue Service today released final guidance for small employers eligible to claim the new small business health care tax credit for the 2010 tax year. Today’s release includes a one-page form and instructions small employers will use to claim the credit for the 2010 tax year.
New Form 8941, Credit for Small Employer Health Insurance Premiums, and newly revised Form 990-T are now available on IRS.gov. The IRS also posted on its website the instructions to Form 8941 and Notice 2010-82 , both of which are designed to help small employers correctly figure and claim the credit.
Included in the Affordable Care Act enacted in March, the small business health care tax credit is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have.
The new guidance addresses small business questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multiemployer health and welfare plans, and employers that subsidize their employees’ health care costs through a broad range of contribution arrangements.
In general, the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.
Small businesses can claim the credit for 2010 through 2013 and for any two years after that. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.
The maximum credit goes to smaller employers –– those with 10 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 or more FTEs or that pay average wages of $50,000 or more per year. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.
Eligible small businesses will first use Form 8941 to figure the credit and then include the amount of the credit as part of the general business credit on its income tax return.
Tax-exempt organizations will first use Form 8941 to figure their refundable credit, and then claim the credit on Line 44f of Form 990-T. Though primarily filed by those organizations liable for the tax on unrelated business income, Form 990-T will also be used by any eligible tax-exempt organization to claim the credit, regardless of whether they are subject to this tax.
More information about the credit, including a step-by-step guide to claiming the credit and answers to frequently asked questions, is available on the Affordable Care Act page on IRS.gov.
Related Articles
- Health Care Tax Credits for Small Businesses Nationwide (whitehouse.gov)
- How Tax Laws Impact a Sole Proprietorship Business (thinkup.waldenu.edu)
- 10 Tax Tips for the Suddenly Unemployed (turbotax.intuit.com)
- Attention Small Employers: New Small Business Health Care Tax Credit Can Help Cut Health Care Costs (eon.businesswire.com)
- How Tax Laws Impact a Sole Proprietorship Business (thinkup.waldenu.edu)
- New report: Employer health insurance premiums increased 41 percent from 2003 to 2009 (eurekalert.org)
- New Report: Affordable Care Act Could Save Families Over $3,000 Per Year (whitehouse.gov)
IRS Presents:Top Ten Facts About the Child and Dependent Care Credit
Did you pay someone to care for a child, spouse, or dependent last year? If so, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. Below are the top 10 things the IRS wants you to know about claiming a credit for child and dependent care expenses.
- The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.
- The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.
- You – and your spouse if you are married filing jointly – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or they were physically or mentally unable to care for themselves.
- The payments for care cannot be paid to your spouse, to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return.
- Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.
- The qualifying person must have lived with you for more than half of 2009. However, see Publication 503, Child and Dependent Care Expenses, regarding exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents.
- The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.
- For 2009, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
- The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income.
- If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. If you are a household employer, you may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. For information, see Publication 926, Household Employer’s Tax Guide.
Beginning with 2009 tax returns, Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers, has been eliminated. Form 1040A filers will now use Form 2441, Child and Dependent Care Expenses. For more information on the Child and Dependent Care Credit, see Publication 503, Child and Dependent Care Expenses. You may download these free forms and publications from IRS.gov or order them by calling 800-TAX-FORM (800-829-3676).
Links:
- Publication 503, Child and Dependent Care Expenses (PDF 167K)
- Form W-10, Dependent Care Provider’s Identification and Certification (PDF 31K)
- Form 2441, Child and Dependent Care Expenses (PDF)
- Form 2441 Instructions (PDF 32K)
- Publication 17, Your Federal Income Tax (PDF 2,075K)
- Tax Topic 602
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