Obamacare Blues Cure: Your Company May Qualify For A Big Tax Credit
There’s a lot of information floating around about the effects of Obamacare on small business — some helpful, some misleading. But here is something everyone should know: Plenty of small companies may qualify for an Obamacare tax credit. And if your company does, it could amount to some significant cash.
“Although businesses with 50 or more employees won’t have to comply with the Affordable Care Act’s employer mandate until 2015, smaller firms that choose to offer health benefits can begin reaping the benefits of an enhanced tax credit starting next year,” reports Inc.
Businesses with 25 or fewer full-time equivalent employees that pay average annual wages below $50,000, and pay at least half of the premiums for single health insurance coverage for workers are eligible for a tax credit of up to 35 percent of employer-paid premiums since 2010. But now, starting in 2014, the credit will increase to 50 percent. Businesses that qualify can to claim the credit for up to two consecutive years.
Under the original Affordable Care Act rules, employers were only able to claim the credit if they had purchased coverage through a state-run SHOP (Small Business Heath Options Program). “But in proposed rules published on August 26 the IRS outlined a transitional option that will come as a relief to employers in states that have been dragging their feet on opening the exchanges,” reports Inc.
So now companies can qualify for the full credit for the entire 2014 tax year, even if coverage was purchased outside the SHOP exchange, if:
-a small employer offers coverage through a plan that begins on a date other than the first day of its taxable year
-that coverage would have qualified the employer for the credit under the rules that were applicable prior to January 1, 2014
-the employer begins offering coverage through a SHOP exchange on the first day of its plan year that starts in 2014.
So just how much can you get back? That depends on the size of your workforce and wages. “Only businesses with fewer than 10 full-time-equivalent employees and average annual wages below $25,000 would qualify for the full 50 percent credit. Larger companies with higher average wages must use a (slightly complicated) formula to determine what size credit they qualify for,” reports Inc.
Don’t be put off by the details and paperwork. Your company, it seems, could come out ahead if you take advantage of the tax credit. The two-consecutive-year limit on the tax credit only refers to coverage for 2014 and after. “If a small business provided insurance and paid a percentage of the premium that would have earned them a tax credit for 2010, 2011, 2012, and 2013, they can go back and file amended returns to receive credit for those years, too,” Eileen Elliott, an attorney specializing in health care issues at Dunkiel Saunders, tells Inc. “There’s been so much politics and lack of understanding that a lot of small employers haven’t taken advantage of this.”