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IR-2010-96 Sept. 7, 2010
WASHINGTON –– The Internal Revenue Service today 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 income tax
returns next year. The IRS also announced how eligible tax-exempt organizations
–– which do not generally file income tax returns –– will claim the credit
during the 2011 filing season.
The IRS has posted a draft of Form
8941 to this website. Both small businesses and tax-exempt organizations
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 small business health care
tax credit on a revised Form 990-T. The Form 990-T is currently used by
tax-exempt organizations to report and pay the tax on unrelated business income.
Form 990-T will be revised for the 2011 filing season to enable eligible
tax-exempt organizations –– even those that owe no tax on unrelated business
income –– also to claim the small business health care tax credit.
The final version of Form 8941 and its instructions will be available later
this year.
The small business health care tax credit was included in the Affordable Care
Act signed by the President in March and is effective this year. The credit is
designed to encourage small employers to offer health insurance coverage for the
first time or maintain coverage they already have.
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. The credit is specifically targeted to
help small businesses and tax-exempt organizations that primarily employ
moderate- and lower-income workers.
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
employers that are tax-exempt organizations. Beginning in 2014, the maximum tax
credit will go up 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.
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 FTEs or more
or that pay average wages of $50,000 per year or more. Because the eligibility
rules are based in part on the number of FTEs, and not simply the number of
employees, businesses that use part-time help may qualify even if they employ
more than 25 individuals.
More information about the credit, including a step-by-step guide and answers to frequently asked
questions, is available on the Affordable Care Act page.
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