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Healthcare Reform
- Does Your Business Qualify For Tax Credits




Full Interview transcript

Carl: Hello business owners this is Carl Kleimann with another Business Survival Tip from Odyssey One Source.   
In order to incent small businesses to offer healthcare, the recent reforms include billions of dollars in employer tax credits.  These credits are aimed at small businesses with fewer than 25 full-time employees and average annual wages of $50,000 or less per employee.  In order to qualify, an employer must contribute a minimum of 50 percent toward the cost of employee-only coverage.  The smallest businesses, those with 10 or fewer full-time employees and average annual wages of $25,000 or less, will qualify for tax credits equal to 35 percent of the health insurance premium that they incur for each year from 2010 through 2013.  Starting in 2014, the credit increases to 50 percent and will continue at that rate for two years.  No further credits are expected at that time. 

Companies that have more than 10 full-time employees and/or average annual wages in excess of $25,000 will be subject to a pro-rata reduction in available tax credits.  The credits go away completely at 25 or more full-time employees.  The number of full-time employees is determined by dividing the total number of hours for which the employer pays wages during the year (but not more than 2,080 hours for any one employee) by 2,080.  So, if an employer pays a total of 62,400 hours during the year, this would equate to 30 full-time employees, regardless of the number of employees that actually worked during the year.  

Subject to certain conditions, business owners and their family members may not be counted as full-time employees and their wages may not be included in the average annual wage calculation.  By the same token, insurance premiums paid on their behalf will not be eligible for tax credits.  Seasonal workers that work 120 days or less during the tax year are also excluded from the average annual wage and full-time employee calculation.

Businesses will claim their tax credits on their annual income tax return.  Tax exempt organizations are eligible to receive tax credits of up to 25 percent of premium and must do so in the form of tax refunds since they don’t pay income tax.  These refunds may not exceed their total income tax withholding and Medicare tax liability as shown on their 941s.

I am Carl Kleimann and this has been another Business Survival Tip by Odyssey OneSource, ranked as the number one Professional Employer Organization three years running by the Black Book of Outsourcing.
For more information on this and other issues affecting employers, please visit www.odysseyonesource.com


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