IRS Encourages Small Employers To Check Out Small Business Health Care Tax Credit

The Internal Revenue Service is encouraging small employers that provide health insurance coverage to their employees to check out its small business health care tax credit website, which provides information and resources designed to help small employers see if they qualify for the credit and then figure it correctly, including a 2013 tax credit estimator, examples of typical tax savings under various scenarios and answers to frequently-asked questions.

Eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014. For 2010 through 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. In 2014, the maximum credit rate rises to 50 percent for small businesses and 35 percent for tax-exempt organizations. Small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be eligible for the credit.

Depending upon how they are structured, eligible small employers are likely subject to one of the following three tax-filing deadlines:

• March 17: Corporations and S corporations that file on a calendar-year basis can figure the credit on Form 8941 and attach it to the income tax return.

• April 15: Partnerships and individuals have until April 15 to complete and file their income tax returns (partnerships on Form 1065 and individuals on Form 1040). Sole proprietors can figure the credit on Form 8941 and attach it to the individual income tax return. Individuals who have business income and credits reported to them on Schedules K-1—partners in partnerships, S corporation shareholders and beneficiaries of estates and trusts—will report the credit amount directly on Form 3800; no Form 8941 required. The resulting credit is entered on Form 1040, Line 53.

• May 15: Tax-exempt organizations that file on a calendar-year basis can use Form 8941 and then claim the credit on Form 990-T, Line 44f.

Taxpayers needing more time to determine eligibility should consider obtaining an automatic tax-filing extension, usually for six months; individuals use Form 4868, businesses use Form 7004 and exempt-organizations use Form 8868. Businesses that have already filed and later find that they qualified in 2013 or an earlier year can still claim the credit by filing an amended return for the affected years. Corporations use Form 1120X, individuals use Form 1040X and tax-exempt organizations use Form 990-T. A three-year statute of limitations normally applies to these refund claims.

Some businesses and tax-exempt organizations that already locked into health insurance plan structures and contributions may not have had the opportunity to make any needed adjustments to qualify for the credit for 2013 or earlier years. These employers can still make changes so they qualify to claim the credit on future returns.

For more information, visit http://www.irs.gov/uac/Newsroom/IRS-Encourages-Small-Employers–to-Check-Out-Small-Business-Health-Care-Tax-Credit;-Helpful-Resources,-Tax-Tips-Available-on-IRS.gov.

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