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Small Business Health Care Tax Credit Applications Due by 12/23/13

On Nov. 27, 2013, HHS delayed online enrollment for FF-SHOPs until November 2014. This means that small employers can enroll directly in SHOP coverage through agents, brokers or insurers. If you plan to claim the Small Business Health Care Tax Credit, you’ll need to get an official eligibility determination from the SHOP Marketplace, which means submitting a SHOP application. If you’re eligible, you’ll claim the tax credit when you submit your federal income tax returns for 2014. For SHOP coverage to begin on Jan. 1, 2014, HHS intends to extend the enrollment deadline to Dec. 23, 2013.

Here’s how to figure out if the company will qualify for a small business health care tax credit:

To get started, you’ll need to complete a small business SHOP application and read the Frequently Asked Questions about SHOP.

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 also have fewer than 25 full-time equivalent employees (FTEs). You are probably wondering: what IS an FTE. Basically, two half-time workers (less than 30 hr/ wk) count as one FTE. That means 20 half-time employees are equivalent to 10 FTEs, which makes the number of FTEs 10, not 20.

• Those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in 2014) per year.

**Remember, you will have to purchase insurance through the SHOP Marketplace to be eligible for the credit for tax years 2014 and beyond.

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For detailed information on filling out this form, see the Instructions for Form 8941.

Your tax adviser / Certified Public Accountant (CPA) should be able to assist you with the preparation when the company is submitting the federal tax returns.

If you are a small business, include the amount as part of the general business credit on your income tax return.

Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000 (as adjusted for inflation beginning in 2014), the amount of the credit you receive will be less.

You will need an agent or broker to help you with your application to the SHOP. Please let us know how we can assist you.

Dana Rostro is the Director of Employee Benefits Sales and Operations at Texas Associates Insurors. Dana is ACA certified and has helped clients develop the best strategies for their operations within the new healthcare legislation.

Small Employer Tax Credit Changes for 2014

The small employer tax credit was created in 2010 upon the passage of the Affordable Care Act. Next year, a few key aspects of the tax credit will change.

For 2014 and later taxable years, the maximum credit increases to 50 percent of premiums paid for taxable small employers and 35 percent of premiums paid for tax-exempt small employers. But those credit percentages are based on the average premium in the small group market in the rating area where employees sign up, instead of the specific premium chosen by employees.

Also beginning in 2014, the health care tax credit is only available to an employer for two consecutive taxable years, and cannot start before the 2014 taxable year. Finally, the new rules require employers to obtain group coverage through an Exchange to claim the credit.

Please contact Texas Associates Insurors for more information on the small employer tax credit.

Dana Rostro is the Director of Employee Benefits Sales and Operations at Texas Associates Insurors.

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