The 50% Tax Credit, Where Are You?

[Post Quartermaster]

Such as? Most of us in the forum don't compete against each other. Help us out here ...

True, sorry - was in a hurry when I typed that....most of the details are at the link below....the big catch that people miss in the tax credit is that it is on a sliding scale - less than 50k average wages & 25 or less FTE's qualifies. Also important to note that all of the "headlines" you generally see about this credit refer to the qualifications for the "maximum credit" - 10 ee's @ $20k average salary. Also, owners and their family don't count:


Partners in a business and certain owners are not taken into account as
employees for purposes of section 45R. Specifically, sole proprietors, partners in a
partnership, shareholders owning more than two percent of an S corporation, and any
owners of more than five percent of other businesses are not taken into account as
employees for purposes of the credit. Family members of these owners and partners
are also not taken into account as employees.



Small Business Health Care Tax Credit for Small Employers


http://www.irs.gov/pub/irs-pdf/f8941.pdf - is the worksheet.


Small employer? Get the credit you deserve.
If you are a small employer. . .
with 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







One last thing to note - one of my clients who claimed this credit last year got audited. This is a very high end real estate office- 8 or so FTE's (office staff). The owner of the business was led to believe by his accountant that the audit was triggered by claiming the small business health care tax credit. The group came out of the audit clean, however, the money saved by the credit ended up being spent on extra hours for his accountant, according to the business owner.


Personally, I am not a CPA, and have no idea if claiming this credit triggered the audit or not, but that is the perception. Also, on another personal note, I think it is awfully crappy that the IRS does not mention the SHOP participation requirement in 2014 on the info page for the tax credit, especially since we may only have 1 SHOP carrier in our state (if that). Hopefully HHS will change guidance on the SHOP participation requirement, but I am not holding my breath.







ETA: a very good calculator can be found here, scroll to bottom and select tax year:
http://www.taxpayeradvocate.irs.gov/calculator/SBHCTCEmployer.htm

 

[somarco]

U.S. GAO - Small Employer Health Tax Credit: Factors Contributing to Low Use and Complexity

170,300 small employers claimed it, estimates of the eligible pool by government agencies and small business advocacy groups ranged from 1.4 million to 4 million. The cost of credits claimed was $468 million. Most claims were limited to partial rather than full percentage credits (35 percent for small businesses) because of the average wage or full-time equivalent (FTE) requirements. 28,100 employers claimed the full credit percentage. In addition, 30 percent of claims had the base premium limited by the state premium average.

One factor limiting the credit's use is that most very small employers, 83 percent by one estimate, do not offer health insurance. According to employer representatives, tax preparers, and insurance brokers that GAO met with, the credit was not large enough to incentivize employers to begin offering insurance.

 

[LGilmore]

"One factor limiting the credit's use is that most very small employers, 83 percent by one estimate, do not offer health insurance. According to employer representatives, tax preparers, and insurance brokers that GAO met with, the credit was not large enough to incentivize employers to begin offering insurance."

That's what the one guy's link posted stated. He has since disappeared. But only 17% of the business that would benefit the most from this program offered health plans in 2009.

I see the main reason they aren't taking it up is even with a 50% tax break, they still have to pay 50% in premium in the best possible scenario. They save money by not participating. Spending the money and getting a tax break on half of it still means they have to spend the money.

 

[somarco]

I see the main reason they aren't taking it up is even with a 50% tax break, they still have to pay 50% in premium in the best possible scenario. They save money by not participating. Spending the money and getting a tax break on half of it still means they have to spend the money.

Sounds like my wife when she comes home from shopping.

Guess how much money we SAVED!

Uh, right . . .

 

[Post Quartermaster]

One last thing to note - one of my clients who claimed this credit last year got audited. This is a very high end real estate office- 8 or so FTE's (office staff). The owner of the business was led to believe by his accountant that the audit was triggered by claiming the small business health care tax credit. The group came out of the audit clean, however, the money saved by the credit ended up being spent on extra hours for his accountant, according to the business owner.


Personally, I am not a CPA, and have no idea if claiming this credit triggered the audit or not, but that is the perception. Also, on another personal note, I think it is awfully crappy that the IRS does not mention the SHOP participation requirement in 2014 on the info page for the tax credit, especially since we may only have 1 SHOP carrier in our state (if that). Hopefully HHS will change guidance on the SHOP participation requirement, but I am not holding my breath.

ETA: a very good calculator can be found here, scroll to bottom and select tax year:
Employer Information - Small Business Health Care Tax Credit Estimator

Update to this story I posted.


Our local Blues sales rep informed us today in our ACA meeting (I've got more info on that to come, when I get some time) that the IRS and Department of Labor have a Memorandum of Understanding between the agencies regarding the Small Business Health Insurance Tax Credit.


According to our Sales Rep, this memorandum ensures that any group claiming the credit gets audited, and according to her, fined by DOL in most cases.


Thus confirming (gonna have to see if I can find some hardcopy info on this) what my client told me. That is a big 'ol can of "WTF, .gov?", in my book.


Guess I won't be "selling" that tax credit anymore, lol.....

 

[stuy119]

Would definitely like to see a copy of the documentation on that one. So would Darrell Issa, I would guess.

 

[somarco]

I doubt you are going to get that in writing. You can certainly try but it is easier to wear a wire to a "wise guys" meeting than get something like this in writing.

 

[Ann H]

It very well may be an audit magnet...

Eight Small Business IRS Audit Areas to Watch Through 2013

 

[AllenChicago]

It very well may be an audit magnet...

Eight Small Business IRS Audit Areas to Watch Through 2013

Excellent work Ann. I was looking for that. Thank-you!

Also, individuals and families who don't have a QHP (and don't pay the 1% penalty?) increase their chances of an IRS audit too.
-ac

 

[somarco]

individuals and families who don't have a QHP (and don't pay the 1% penalty?) increase their chances of an IRS audit too.

Why?

Why would you lie about having a QHP and pay a penalty?

If your plan meets the govt standard check off "yes" in the box and move on to the next question.