Again for the 2011 tax year, the IRS is allowing up to a 35% tax credit to eligible small employers for health insurance premiums paid for employees. Below is a general summary of who would qualify for this credit. These are general requirements to let you know if you might possibly qualify and the specific requirements can be found in the attached instructions for Form 8941.
You are an eligible small employer for the tax year if you meet the following requirements:
- You paid premiums for employee health insurance coverage under a qualifying arrangement. For 2011, you must have paid at least 50% of the premium cost for each employee enrolled in any health insurance coverage you provide to employees.
- You had fewer than 25 full-time equivalent employees (FTE) for the tax year. In general, all employees (excluding most owners) who perform services for you during the tax year are taken into account in determining your FTEs. However, there are several categories of excluded employees, so please see page 2 of the instructions for form 8941 for a full definition. Your credit is reduced if you had more than 10 FTEs for the tax year and is zero if you had 25 or more FTEs.
- You paid average annual wages of $50,000 or less. Your credit is reduced if you paid average annual wages of more than $25,000 for the tax year and is zero if you paid average annual wages of $50,000 or more for the tax year.
If you believe that your company may qualify for this tax credit, please fill out the items highlighted in blue on pages 1 and 4 of the worksheets in this Excel file and then return this file to us. Please review the instructions for Form 8941 to see a more detailed definition of eligible and excluded employees and the types of health insurance coverage that qualify.
This credit must be claimed on the 2011 business income tax return. Please let us know as soon as possible if you think that your company may qualify so we know to wait on the final preparation of the 2011 business tax return. Once the business tax return and any flow-through personal income tax returns have been filed, it will require amending tax returns to correct for this at an additional charge.
If you have any questions, please feel free to contact us.