IRS Issues Guidance on Small Business Health Insurance Tax Credit

IRS Issues Guidance on Small Business Health Insurance Tax Credit

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Shirl Kennedy of Docuticker reports that the IRS has issued Notice 2010-44 Tax Credit for Employee Health Insurance Expenses of Small Employers:

The Internal Revenue Service today issued new guidance to make it easier for small businesses to determine whether they are eligible for the new health care tax credit under the Affordable Care Act and how large a credit they will receive.

The guidance makes clear that small businesses receiving state health care tax credits may still qualify for the full federal tax credit. Additionally, the guidance allows small businesses to receive the credit not only for regular health insurance but also for add-on dental and vision coverage.

Notice 2010-44 provides detailed guidelines, illustrated by more than a dozen examples, to help small employers determine whether they qualify for the credit and estimate the amount of the credit. The notice also requests public comment on issues that should be addressed in future guidance.

Included in the Affordable Care Act approved by Congress in March and signed into law by the President, the small business health care tax credit, which is in effect this year, is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

The Notice lists the requirements for obtaining the credit:

In order to be an eligible small employer,

1) the employer must have fewerthan 25 full-time equivalent employees (FTEs) for the taxable year;

2) the average annual wages its employees for the year must be less than $50,000 per FTE; and

3) the employer must maintain a “qualifying arrangement.”

A qualifying arrangement is an arrangement under which the employer premiums for each employee enrolled in health insurance coverage offered by the employer in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the coverage.

Here is the entire notice in PDF format.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida