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Small Business Health Care Tax Credit Form Now Available

04.16.2019

In very late January, the IRS released the 2018 Form 8941, to be used by eligible small employers to calculate their health care tax credits. If you may qualify for this potentially valuable tax break, ask your tax preparer about claiming the credit on your 2018 return or filing an amended return if you’ve already filed.

Background on the credit

The small business health care tax credit generally is available to employers that:

  • Have fewer than 25 employees
  • Pay average annual wages of less than $50,000 (indexed)
  • Contribute a uniform percentage of at least 50 percent of the premium costs for employee health insurance coverage obtained through a Small Business Health Options Program (SHOP), unless an exception applies

The maximum tax credit is generally 50 percent of employer-paid premiums (35 percent for tax-exempt eligible small employers) and can be taken for only two tax years, which must be consecutive.

Instruction details

The 2018 instructions identify the information needed to calculate the tax credit, and include worksheets to determine:

  • Number of employees,
  • Average wages, and
  • Average small market premium for each state where the employer has employees.

The credit may be reduced if the employer pays premiums greater than the average for the state. Average premiums for all states by county are provided in a table, updated for 2018.

The instructions note the transition relief provided in IRS Notice 2018-27. It allows eligible small employers with a principal business address in certain counties — where no SHOP Exchange coverage was available — to claim the credit for 2018 if they properly claimed the credit under Internal Revenue Code Section 45R for all or part of 2017. Once your tax preparer calculates the tax credit, it is claimed as a general business credit on Form 3800 (or, by tax-exempt small employers, as a refundable credit on Form 990-T).

No transition relief

In previous years, the instructions have specified the counties with transition relief. However, for 2018 and beyond, employers and their tax preparers are instructed to go to Healthcare.gov at https://www.healthcare.gov/see-plans/#/small-business and enter a ZIP code to see whether a county has coverage available through a SHOP Exchange. The credit continues to be available to qualifying employers using the SHOP Exchange direct enrollment process.

 After delay, DOL issues 2019 adjusted penalty amounts

The U.S. Department of Labor has announced the 2019 annual adjustments to civil monetary penalties for a wide range of benefits-related violations. Legislation enacted in 2015 requires annual adjustments to certain penalty amounts by January 15 of each year but, because of the government shutdown earlier this year, the 2019 penalties went unpublished by this deadline and, thus, have a later-than-usual effective date.

The 2019 adjustments are effective for penalties assessed after January 23, 2019, for violations occurring after November 2, 2015. Here are some highlights related to health care and welfare plans:

Form 5500. The maximum penalty for failing to file Form 5500 (which must be filed annually for most ERISA plans) increases from $2,140 to $2,194 per day that the filing is late.

Group health plans. The maximum penalty for failing to provide the summary of benefits and coverage required under the Affordable Care Act increases from $1,128 to $1,156 per failure. Violations of the Genetic Information Nondiscrimination Act, such as establishing eligibility rules based on genetic information or requesting genetic information for underwriting purposes, and failures relating to disclosures regarding the availability of Medicaid or children’s health insurance program assistance, may result in penalties of $117 per participant per day, up from $114.

Multiple Employer Welfare Arrangements. Penalties for failure to meet applicable filing requirements, which include annual Form M-1 filings and filings upon origination, increase from $1,558 to $1,597 per day.

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