Don’t Forget the Small Employer Health Care Tax Credit

Small employers that provide health insurance coverage to their employees should determine whether they are eligible to claim the small business health care tax credit.

Under the Patient Protection and Affordable Care Act (P.L. 111-148), effective for tax years beginning after Dec. 31, 2009, an eligible small employer (ESE) may claim a credit on Form 8941, Credit for Small Employer Health Insurance Premiums, equal to a percentage (35% in tax years beginning in 2010 to 2013; 50% in tax years beginning after 2013) of nonelective contributions for health insurance for its employees.

An ESE is generally an employer with no more than 25 full-time equivalent employees employed during its tax year, and whose employees have average annual wages of no more than $50,000. However, the full credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual full-time equivalent wages from the employer of not more than $25,000.

Pending deadlines. Depending on the structure of the ESE, deadlines for claiming the small business health care tax credit are as follows:

  •  For calendar-year corporations that can figure the credit on Form 8941 and claim it as part of the general business credit on Form 3800, both of which are attached to the corporate income tax return, the filing deadline is March 15th, but can be extended to Spetember 15th
  • For individuals, including sole proprietors and people who have business income reported to them on Schedules K1 (e.g., partners in partnerships, S corporation shareholders, and beneficiaries of estates and trusts), the filing deadline is April 17th. These individuals also attach Forms 8941 and 3800 to their return and enter the resulting credit on Line 53 of Form 1040.

RIA observation: The due date is April 17th because Apr. 15, 2012, is a Sunday and Apr. 16, 2012, is the Emancipation Day holiday in the District of Columbia.

… For calendar-year tax-exempt organizations that can use Form 8941 then claim the credit on Line 44f of Form 990-T, the filing deadline is May 15th.

If a taxpayer is unable to determine eligibility for the credit by the applicable deadline, the taxpayer should consider obtaining an automatic filing extension.


Amended returns. A business can file an amended return on Form 1120X, 1040X, or 990-T for 2010 or 2011 if it later determines that it could have, but failed to, claim the credit for one or both years. A business or tax-exempt organization that was unable to qualify for the credit for these years can still make the necessary changes to their health insurance plans so they qualify to claim the credit on their returns for 2012 and later years.


This entry was posted in Featured on Homepage, Tax Notes and tagged , . Bookmark the permalink.

Comments are closed.