IRS RELEASES HEALTH CARE TAX CREDIT FORM
Washington, D.C. - The Internal Revenue Service has released a draft version of the form that small businesses and tax-exempt organizations will use to calculate the small-business health care tax credit when they file tax returns next year. It also announced how eligible TEOs - which do not generally file income tax returns - will be able to claim the credit during the 2011 filing season.
The IRS has posted a draft version of Form 8941 on its Web site, www.irs.gov. Both small businesses and TEOs will use the form to calculate the credit. A small business will then include the amount of the credit as part of the general business credit on its income tax return.
Tax-exempt organizations will instead claim the credit on a revised Form 990-T. The Form 990-T is currently used by TEOs to report and pay the tax on unrelated business income. Form 990-T will be revised for the 2011 filing season to enable eligible TEOs - even those that owe no tax on unrelated business income - also to claim the credit.
The final version of Form 8941 and instructions will be available later this year.
In 2010, the credit is generally available to small employers that contribute an amount equivalent to at least half the cost of single coverage towards buying health insurance for their employees.
For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small-business employers and 25 percent of premiums paid by eligible TEOs. In 2014, the maximum credit will go up to 50 percent of premiums paid by small-business employers and 35 percent of premiums paid by TEOs for two years. The maximum credit goes to employers with 10 or fewer full-time equivalent employees - paying annual average wages of $25,000 or less. The credit is completely phased out for employers with 25 full-time equivalent employees or more, or that pay average wages of $50,000 per year or more. Eligibility rules are based in part on the number of FTEs, so businesses that use part-time help may qualify even if they employ more than 25 individuals.
