Draft Form to Calculate Small Business Health Care Tax Credit Released

calculator.jpgThe Internal Revenue Service (IRS) has released a draft of Form 8941 (pdf) for eligible businesses and tax-exempt organizations to use in calculating the health care tax credit created by the Patient Protection and Affordable Care Act (“Affordable Care Act”). This tax credit is targeted to small businesses that employ moderate- and lower-income workers, and contribute an amount equivalent to at least half of the premium cost of providing health insurance coverage to employees. Specifically, to be eligible to receive this credit an employer or tax-exempt organization must have fewer than 25 full-time equivalent employees (“FTEs”) for the tax year, and pay less than $50,000 in average annual wages per FTE. As explained in an IRS press release, the maximum credit available under this program for tax years 2010 to 2013 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. The maximum tax credit will increase starting in 2014 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.

Eligible employers can use the new draft Form 8941 to calculate their credit amount, which will then be included as part of the general business credit on their income tax returns. Tax-exempt organizations will claim their credits via the small business health care tax credit on a revised Form 990-T.

More information on this business tax credit – including a step-by-step guide (pdf) and answers to frequently asked questions – can be found on the IRS’s webpage: Small Business Health Care Tax Credit for Small Employers.

A final version of Form 8941 will be made available later in the year.

This entry was written by Ilyse Schuman.

Photo credit:  Bartek Szewczyk

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.