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Small Business Owners, Here’s How to Claim Your Credit

03.07.2016

IRS Notice 2015-17: Limited Relief for Payment Plan ViolationsJust a couple of weeks before extending the deadlines for Forms 1094 and 1095, the IRS released the 2015 version of Form 8941. This should be of particular interest to small business owners, because Form 8941 can be used by eligible small employers to calculate the small business health care tax credit. Generally, this tax break is available to employers that:

  • Have fewer than 25 full-time equivalent employees,
  • Pay average annual wages of less than $50,000 (indexed for inflation), and
  • Contribute a uniform percentage of at least 50% of the premium costs for employee health insurance coverage.

The maximum tax credit is generally 50% of premiums paid (35% for tax-exempt eligible small employers, subject to a reduction for sequestration). Once calculated, the credit is claimed as a general business credit on Form 3800 (or, by tax-exempt small employers, as a refundable credit on Form 990-T).

The 2015 version of Form 8941 is virtually unchanged from 2014, other than references to the filing year and use of the updated maximum annual wages amount of $52,000. Although the inflation-adjusted threshold for 2015 is $51,600, the rounding rule required for calculating average wages results in $52,000 being the effective limit for purposes of 2015 Form 8941.

The instructions identify the information needed to calculate the credit and include worksheets to determine the number of employees and average wages. An additional worksheet helps calculate the average premium for the small group health insurance market for each state where the employer has employees.

Finally, the instructions incorporate transitional relief that permits direct enrollment for employers in certain Iowa counties without 2015 Small Business Health Options Program coverage. What’s more, the list of average premiums, by county, for all 50 states plus the District of Columbia has been updated for 2015. These averages are relevant because an employer’s health care tax credit may be reduced if the employer pays premiums greater than the average for the small group market for the state in which its employees work.


Ron M. Present, CALA, CNHA, LNHAIf you have additional questions on how your small business can calculate its health care tax credit, contact your Brown Smith Wallace tax advisor or Ron Present, Partner and Health Care Industry Group Leader, at 314.983.1358 or rpresent@bswllc.com

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