Health tax credit aids small businesses

Natural events and status conditions could benefit small business owners when it comes to filing estimated tax payments and completing health insurance expense forms for the Internal Revenue Service.

Many small business employers that pay at least 50 percent of each worker’s employee health insurance coverage may be eligible for a small business health care tax credit, under qualifying arrangements with the IRS.

“This credit can enable small business and small tax-exempt organizations to offer health insurance coverage for the first time,” IRS spokeswoman Dee Stepter said. “It also helps those already offering health insurance coverage to maintain the coverage they already have.”

According to federal tax codes, this credit is specifically targeted at small business and tax-exempt organizations that employ 25 or fewer full-time workers with an average income of $50,000 or less annually. Businesses wanting to take the health care credit will have to complete Form 8941 as part of their general business credit on Form 3800. This would also be included with their tax return.

Stepter confirmed other tips regarding tax credits for small businesses that will soon face end-of-year accounting requirements for 2010 taxes.

Qualifying businesses may be eligible to claim damages resulting from Tropical Storm Lee and other disaster-related relief postponements, and delay filing their fourth quarter tax payment until Oct. 31.

Businesses wanting to take the one-month filing extension will have to complete Form 8941 and reference it to form 3800, as done with the health credit.

Sole proprietors filing Form 1040, Partners and S-corporation shareholders who report income on Form 1040 may take a tax estimate filing extension until Oct. 17. They too would need to make use of Forms 8941 and 3800, plus reflecting the adjustment on Line 53 of Form 1040.

Tax-exempt organizations that file based on the calendar year may request an extension of fourth quarter payments until Nov. 15, with the use of Form 8941 and claim their employee health insurance coverage credit on Form 990-T, Line 44f.

Businesses that have already filed their fourth quarter tax estimates for the 2010 tax year, but determine eligibility for added credits, may file an amendment with Form 1120X. Individual and sole proprietors should use Form 1040X.

Stepter said that businesses that are not eligible to claim these credits for the 2010 tax year may be able to do so in future tax years.

“Some businesses that already locked into health insurance plan structures and contributions for 2010, may not have had the opportunity to make any needed adjustments to qualify for the credit for 2010. So, these businesses may be eligible to claim the credit on 2011 returns or in years beyond.”

Small business employers will be able to claim the employee health coverage credit for 2010 through 2013 and two additional years beginning in 2014.

For tax years 2010 through 2013, the maximum health insurance credit for small business employers is 35 percent of premiums paid. Eligible tax-exempt employers receive a maximum credit of 25 percent of premiums paid.

Beginning in 2014, the maximum tax credit will increase to 50 percent of health insurance premiums paid by eligible small business employers, and 35 percent of health insurance premiums paid by tax-exempt organizations.