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 – which was approved by Congress and signed by President Obama on Mar. 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 maximum credit is 35% of premiums paid in 2010 by eligible small business employers and 25% of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50% of premiums paid by eligible small business employers and 35% 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, the IRS will provide further information on how to claim the credit.
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 about the credit, call us or visit the IRS website at IRS.gov.
RichardL. Lipton CPA & Associates LLC, located in Florham Park, N.J.,draws on its founder’s 10 years as a stockholder and manager offamily-owned Sam’s Tire Co. in Paterson, N.J.
RichardL. Lipton CPA & Associates LLC “is structured to personally servelarge and small clients who have a need for business consultingservices as well as accounting and tax services. We have even developeda niche in the area of forensic accounting. Our clients have realizedthat this combination of skills is extremely valuable in providing thehighest quality professional services in today’s and the future’seconomy.” – Richard L. Lipton CPA
Contact Richard L. Lipton CPA & Associates LLC:
E-mail: [email protected]