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The IRS announced this week that they will begin contacting over four million small businesses and nonprofit organizations to let them know about the new small business health care tax credit.
The Patient Protection and Affordable Care Act, that was signed into law by the president, allows small business owners to take advantage of a new tax credit for offering health insurance, or maintaining current health insurance benefits for their employees. This new credit is one of the first health care reform provisions to go into effect.
â€œWe want to make sure small employers across the nation realize that â€"â€" effective this tax year â€"â€" they may be eligible for a valuable new tax credit. Our postcard mailing â€"â€" which is targeted at small employers â€"â€" is intended to get the attention of small employers and encourage them to find out more,” IRS Commissioner Doug Shulman said. â€œWe urge every small employer to take advantage of this credit if they qualify.â€
Small businesses that pay at least half of the cost of health coverage for employees in 2010, will be eligible for this new tax credit. This tax credit targets nonprofits and small businesses that employ moderate to low income employees.
The maximum tax credit for the years 2010 to 2013 is 35 percent of the premiums paid by small business owners and 25 percent of premiums paid by nonprofit organizations. Employers with less than 10 FTEs, with average wages less than $25,000, will get the maximum credit. Employers may qualify if they have part-time employees since eligibility is based on number of FTEs and not number of employees. The tax credit will be phased out for employers that pay average wages of $50,000 per year and have 25 FTEs or more.
Nonprofits and small businesses who are eligible, will be able to claim the tax credit on their tax return submitted in 2011.
Small organizations who currently offer health care insurance to their employees, or are contemplating offering insurance, may find this new tax credit to be a financial incentive for the next few years.