The Enid News and Eagle, Enid, OK

November 30, 2013

IRS website provides info on tax credits

By Phyllis Zorn, Staff Writer
Enid News and Eagle

ENID, Okla. — Small businesses with fewer than 25 full-time employees and paying an average wage of less than $50,000 per year can take a tax credit if they pay at least half of employees’ health insurance premiums.

The Internal Revenue Service website provides information on the tax credit. For tax years 2010 through 2013, the credit amounts to 35 percent of the premiums paid for employees or 25 percent of the premiums if the employer is a tax-exempt business such as a charity.

Starting in 2014, the rules for the tax credit change a bit. Health insurance must be purchased through the Small Business Health Options Program Marketplace; the credit increases to up to 50 percent of the premiums paid or 35 percent of premiums paid by tax-exempt employers; and the credit will be available for two consecutive tax years.

“If you have fewer than 50 employees, but are a member of an ownership group with 50 or more full-time equivalent employees, you are subject to the rules for large employers,” the IRS website reads.

The website reads: “While the tax credit has been open to eligible employers since tax year 2010, starting in 2014 you must buy coverage through SHOP to claim the credit. If you currently claim the credit, it’s important to take this into account as you make your coverage plans for 2014.”

Other changes for businesses are coming as the Affordable Care Act continues to roll out.

“Effective for calendar year 2015, if you provide self-insured health coverage to your employees, you must file an annual return reporting certain information for each employee you cover,” the IRS website reads. “This rule is optional for 2014.”

Even though only a portion of the health insurance premium can be applied toward the tax credit, eligible businesses still can claim a business expense deduction for the remainder of the premiums, the IRS website reads.    

“There is good news for small tax-exempt employers too,” the website reads. “The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.”

The amount of the credit is on a sliding scale, with smaller businesses getting bigger credits.