My tax planning, tax preparation, and accounting services include:

What's New!

*The Patient Protection and Affordable Care Act 

There is, for calendar year 2010 and later years, a credit that is equal to 35% of Health Insurance Premiums that an employer pays. The rules are extensive and the calculation a bit interesting. 

Here is a summary:

1)  You must have LESS than 25 equivalent Full Time Employees. Beyond 10, there is a phase out. To calculate, I must know hours worked, vacation hours, holiday hours, etc. Quickbooks will provide this information, but only if you enter the detailed data weekly.

2)  You must have average annual wages of LESS than $50,000.00 per employee, not counting owners or family members. Beyond $25,000 there is a phase out. Usually, this is a calculation that can be gleaned from Quickbooks information.

3)  The employer MUST PAY at least 50% of Health Insurance Premiums for each employee enrolled in health care coverage offered by the employer. Cafeteria Plan (Section 125) payments are considered to be paid by the employee.

4)  The premium payments must be less than the same arrangement for the average premium for the small group market in the state, or an area within the state, in which the employer offers coverage if it were substituted for the actual premium.

5)  The MAXIMUM credit is 35% of the employer’s premium expenses counted towards the credit.

6)  For employers with more than 10 employees and / or more than $25,000.00 per employee of wages, the calculation should still be made, since there is a phase out that still may allow some credit.

7)  Employees that do NOT count in this calculation are Sole Proprietors, Partners, Shareholders owning more than 2% of an S Corp, Shareholders owning more than 5% of a C Corp, most family members and / or relatives, but NOT live in significant others.

How do you get the money? This is NOT a payroll tax credit. This is NOT related to the HIRE (Hiring Incentives to Restore Employment) Act. The credit is claimed on the employer’s annual INCOME TAX return. You are able to adjust your estimated tax payments for this credit, just be cautious when doing this. Also, an important thing to remember is that this is a CREDIT against income tax, but NOT against Self Employment tax. If you have deductions, losses, or other credits which reduce your income tax, this will not help you. This is NOT a refundable credit.

While this was enacted March 23, 2010 it is fairly recent that the actual rules and how they are to be applied is just now coming out. Between now and filing season, there may be more changes or clarifications that affect the credit that you will get. 

I strongly recommend that you have your payroll files, in Quickbooks or another easily accessible source, set up now to quickly produce the hours and wages necessary to claim the credit on your income tax return. 

Should you have any questions, please contact me.

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Curtis T. Hamilton
Tax Consultant
(603) 242-3888
Fax (603) 242-3218
or
Email me, Curt, at CurtHamiltonTaxes dot com