HEALTHCARE CREDIT FOR SMALL BUSINESSES
Are you a small business or tax-exempt organization that pays at least half the cost of single health insurance coverage for your employees? If so, you may qualify for a new tax credit. The new small business health care tax credit is effective now as part of the Affordable Care Act, which became law this year.
Who's eligible for the credit?
The credit is targeted to help employers with low and moderate income workers afford to offer employee health insurance coverage. Generally, employers that have fewer than 25 full-time equivalent (FTE) employees and pay wages averaging less then $50,000 per employee per year may qualify for the credit. Because the eligibility formula is based in part on the number of FTE's, not the number of employees, employers that have more than 25 individual workers may also qualify if some of their workers are part-time.
How much is the tax credit?
For each year from 2010 through 2013, the maximum credit is 35% of premiums paid by eligible small businesses and 25% of premiums paid by eligible tax-exempt organizations. An enhance version of the credit will be effective beginning in 2014.
How and when can I claim the credit?
Small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. Tax-exempt employers can expect additional information in the coming months on how to claim the credit.
Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law today.
Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.
In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.
The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.
In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.
Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit.
Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010.
CONTACT US TODAY AT 931-802-2290 FOR MORE INFORMATION AND TO SEE IF YOU QUALIFY
FOR THE NEW CREDITS
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Small Business Health Care Tax Credit
NEW INCENTIVES FOR HIRING
