IRS Encourages Small Employers to Check out the Small Business Health Care Tax Credit

With tax season well upon us, the IRS is actively encouraging small employers to see if they qualify for the “small business health care tax credit.” The first requirement is that your company currently provides health coverage to your employers.

The small business tax credit has its origin in the Affordable Care Act—i.e., “Obamacare”—which was enacted in 2010. Under the ACA, eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014,” reads the IRS website.

One reason for the IRS campaign is new credits. According to the IRS, for the fiscal years 2010-2013 the maximum credit was 35% of premiums paid for small business employers. For small tax-exempt employers (such as charities) the maximum credit was 25% of premiums paid.

According to the IRS, “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.” And going forward, here’s how the IRS broke down the tax credits that will begin with FY 2014:

  • The maximum credit will increase to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
  • To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.
  • The credit will be available to eligible employers for two consecutive taxable years.

Of additional value to all interested parties is the IRS page, titled “Small Business Health Care Tax Credit,” which includes a 2014 credit estimator.

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