If you are a small business that has fewer than 25 full-time equivalent employees, pay an average wage of less than $50,000 a year and pay at least half of employee health insurance premiums, you may qualify for the Small Business Health Care Tax Credit.
This credit is available for tax years 2010 through 2013. Even if you qualified in previous years (2010-2011) and didn't claim the credit, there is still time to do so. This credit offers small business employers a maximum of 35 percent of the premium amounts paid for your employees. You can carry this credit back or forward to other tax years.
The difference between the credit and the total amount of the premium can still be deducted as a business expense deduction. Here's an example: Your company pays $50,000 in premiums. You qualified for a 15 percent credit, or $7,500, on the tax return. The other $42,500 can still be claimed as a business expenses deduction. This allows you to take both the credit and the deduction.
There are some conditions of course. To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must have fewer than 25 full-time equivalent employees (FTEs). Two part-time employees count as one full-time employee. These employees must have average wages of less than $50,000 a year.
So, for example, you have 29 employees and 17 are full time, the other 12 are counted as an additional six full-time employees making the total 23 full-time employees. Well, so far so good. Total wages were $250,000 for the year. Divide the $250,000 by the 23 full-time employees and you have an average wage of $10,869.57. Even if one of those employees earns more than the $50,000 a year, the average employee wage is $10,869.57, so you qualify for this credit.
You must use Form 8941 to apply for this credit and attach it to the tax return. If you qualify for this credit, but did not take it on the 2010 or 2011 business tax return, file an amended return as this savings is only available for three years.
Employers hiring veterans by the end of the year can get an expanded tax credit. The Work Opportunity Tax Credit is available for qualified veterans who begin work on or after Nov. 22, 2011, but before Jan. 1, 2013. The credit can be as high as $9,600.
A qualified veteran is someone who served on active duty in the armed forces for more than 180 days or had been discharged or released from active duty for a service-connected disability. The veteran was unemployed for a period or periods totaling at least four weeks but less than six months in the one-year period ending on the hiring date.
Employers hiring veterans with service-related disabilities may be eligible for the maximum tax credit. This credit is only available for 2012, so take advantage of this credit and provide a job for a veteran. It's a win-win situation.
For more detailed information for taking the Small Business Health Care Credit and the Work Opportunity Credit visit the IRS website and type "Small Business Health Care Credit" or "Work Opportunity Credit" in the search engine.
Tracy Bunner is an enrolled agent and tax preparer with an office in Harrisville. She can be reached at 801-686-1995 or at email@example.com.