Tax Credit Helps Small Employers Provide Health Insurance Coverage
Many small businesses and tax-exempt organizations that provide health insurance coverage to their employees now qualify for a special tax credit.
Included in the health care reform legislation, the Patient Protection and Affordable Care Act, approved by Congress and signed by President Obama on March 23, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.
The IRS touts that this credit provides a real boost to eligible small businesses by helping them afford health coverage for their employees. Small businesses and tax-exempt employers should see if they qualify for this important tax break — which is already effective.
The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.
The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low and moderate income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.
The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less.
Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, further information on how to claim the credit will be coming soon.
The IRS will use postcards to reach out to millions of small businesses that may qualify for the credit. The postcards will encourage small business owners to take advantage of the credit if they qualify.
For more information, contact Gordon Advisors at 248-952-0200 or on the web at www.gordoncpa.com.
Gordon Advisors, P.C. (www.gordoncpa.com) is a full-service certified public accounting and business consulting firm that maintains an office in Troy, Michigan. They specialize in personal and business income tax, accounting, auditing, financial planning, strategic planning, valuation and litigation support services, fraud, forensic, and risk management services, computer support, and business consulting. Gordon Advisors, P.C. is currently celebrating 55 years of service to the community.