Small Employers Should Evaluate Eligibility For Small Business Health Care Tax Credit


Small employers that provide health insurance coverage to their employees should consider whether they qualify for and should claim the small business health care tax credit authorized by Congress as part of the Patient Protection and Affordable Care Act (Affordable Care Act).

The small business health care tax credit enacted two years ago may provide a tax credit for certain small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be eligible for this credit. The credit is specifically targeted to help small businesses and tax-exempt organizations provide health insurance for their employees.

Depending upon how they are structured, eligible small employers are likely subject to one of the following three tax-filing deadlines, which fall in coming weeks:

  • March 15: Corporations that file on a calendar year basis 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 their corporate income tax return.
  • April 17: Individuals have until April 17 to complete and file their returns on Form 1040. This includes Sole proprietors, as well as people who have business income reported to them on Schedules K-1—partners in partnerships, S corporation shareholders and beneficiaries of estates and trusts. They also attach Forms 8941 and 3800 to their return. The resulting credit is entered on Form 1040 Line 53.
  • May 15: Tax-exempt organizations that file on a calendar year basis can use Form 8941 and then claim the credit on Form 990-T, Line 44f.

Taxpayers needing more time to determine eligibility might consider obtaining an automatic tax-filing extension, usually for six months. See Form 4868 for individuals, Form 7004 and its instructions for businesses and Form 8868 for tax-exempt organizations.

Businesses that have already filed and later find that they qualified in 2010 or 2011 can still claim the credit by filing an amended return for one or both years. Corporations use Form 1120X, individuals use Form 1040X and tax-exempt organizations use Form 990-T.

Some businesses and tax-exempt organizations that already locked into health insurance plan structures and contributions may not have had the opportunity to make any needed adjustments to qualify for the credit for 2010 or 2011. These employers can still make the necessary changes to their health insurance plans so they qualify to claim the credit on 2012 returns or in years beyond. Eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014.

The recently-revamped Small Business Health Care Tax Credit page on IRS.gov provides additional information and resources designed to help small employers see if they qualify for the credit and then figure the amount of the credit, if any, that the employer qualifies to claim. These include a step-by-step guide for determining eligibility, examples of typical tax savings under various scenarios, answers to frequently-asked questions, a YouTube video and a webinar.

 For More Information Or Assistance

If you need help reviewing or updating your health benefit program for compliance with ACA or other laws or with any other employment, employee benefit, compensation or internal controls matter, please contact the author of this article, attorney Cynthia Marcotte Stamer.

A 2011 inductee to the American College of Employee Benefits Council, immediate past-Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPPT Employee Benefits & Other Compensation Arrangements, an ABA Joint Committee on Employee Benefits Council Representative, the ABA TIPS Employee Benefit Plan Committee Vice Chair, former ABA Health Law Section Managed Care & Insurance Interest Group Chair, past Southwest Benefits Association Board Member, Employee Benefit News Editorial Advisory Board Member, and a widely published speaker and author,  Ms. Stamer has more than 24 years experience advising businesses, plans, fiduciaries, insurers. plan administrators and other services providers,  and governments on health care, retirement, employment, insurance, and tax program design, administration, defense and policy.   Nationally and internationally known for her creative and highly pragmatic knowledge and work on health benefit and insurance programs, Ms. Stamer’s  experience includes extensive involvement in advising and representing these and other clients on ACA and other health care legislation, regulation, enforcement and administration. 

Widely published on health benefit and other related matters, Ms. Stamer’s insights and articles have appeared in HealthLeaders, Modern Health Care, Managed Care Executive, the Bureau of National Affairs, Aspen Publishers, Business Insurance, Employee Benefit News, the Wall Street Journal, the American Bar Association, Aspen Publishers, World At Work, Spencer Publications, SHRM, the International Foundation, Solutions Law Press and many others.

For additional information about Ms. Stamer and her experience, see www.CynthiaStamer.com.

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