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The IRS has released the 2013 version of Form 8941, which eligible small employers will need to use to calculate their small business health care tax credit.
Employers may qualify for a tax credit of up to 35% (or up to 25% for eligible tax exempt organizations) of nonelective employer contributions under a qualifying health insurance arrangement, if they have fewer than 25 employees AND pay average annual wages of less than $50,000 per employee. A qualifying health insurance plan generally requires the employer to pay a uniform percentage of the premium (not less than 50%) for each enrolled employee’s health coverage. Once calculated, the tax credit is claimed as a general business credit on Form 3800 (or for tax exempt small employers as a refundable credit on Form 990-T).
There are important changes to the tax credit that become effective beginning with 2014 taxable years that are important to note:
1. the maximum credit amount increases from 35% to 50% of employer paid premiums
2. coverage under a qualifying arrangement must be offered through a SHOP Exchange
3. the credit can be claimed for only 2 consecutive years beginning in or after 2014, and
4. due to the cost-of-living adjustment, the tax credit will be reduced if an employer’s average annual wages exceed $25,400 and will be eliminated if average annual wages exceed $50,800
Employers who plan on claiming the small business tax credit for 2014 will need to make sure they are familiar with these new requirements.