K&A Accountancy launched a service Monday to help millions of small businesses take advantage of an Affordable Care Act health insurance tax credit that can be worth up to $50,000 per year.

Christian Payne

Relatively few small businesses are taking advantage of the tax credit. According to the Government Accountability Office, only 170,300 small employers claimed the Small Employer Health Insurance Tax Credit in tax year 2010, out of potentially up to 4 million eligible organizations.

“One reason is the complexity of calculating the credit,” said Kellogg & Andelson CEO Christian Payne in a statement. “The IRS estimates that it takes 12 to 16 hours to complete the analysis. That’s why we developed this service—to make it easier for businesses to determine whether or not they qualify, and to claim it if they do. The credit can be as much as $50,000 per year, so it’s worth investigating.”

K&A launched a new Web site dedicated to the new service at http://kahealthcarecredit.com/.

As part of the new service, the firm will provide a paper trail proving the calculations in case of audit. K&A’s service is more accurate and comprehensive than free online calculators—as most calculators don’t allow users to optimize the credit and don’t account for tax exempt organizations.

K&A’s service is available to all small business employers and tax-exempt employers, whether or not they are current K&A clients. The fee for K&A’s service is $500 for each tax year analyzed.

Once engaged, K&A will request information about employees, their compensation and benefits, among other information. K&A will provide the analysis summary and the completed IRS Form 8941, which is necessary to claim the credit.

For tax years 2010 through 2013 the maximum credit is 35 percent of health insurance premiums paid by small business employers (25 percent for small tax-exempt employers). The credit is scheduled to increase to 50 percent for small business employers and 35 percent for small business tax exempt employers after 2013. It terminates after 2015.

However, in tax years that begin after 2013, an employer must participate in an insurance exchange in order to claim the credit, and any modifications and restrictions on the credit apply.
To qualify, an employer must have:

• Fewer than 25 full-time equivalent employees (FTE) for the tax year (owners, their family members and certain part-time employees do not count toward the total number of FTEs).

• Average annual wages of its employees are less than $50,000 per FTE (the wages of owners, their family members and certain part-time employees may not count toward the calculation of this average).

• A “qualifying arrangement” (health insurance) program that is maintained.

For more information, visit http://kahealthcarecredit.com/.