Small Business Health Care Tax Credit filing deadline is May 15
April 18, 2013
April 18, 2013
Small credit unions should be aware that the filing deadline to claim a credit for the 2012 tax year Small Business Health Care Tax Credit is coming up on May 15.
In December 2010, the Internal Revenue Service (IRS) released guidance on how small employers may be eligible to claim the new small-business health care tax credit starting with the 2010 tax year. The health care tax credit was created as part of the 2010 Affordable Care Act. Since the tax credit was introduced, only a few credit unions have taken advantage of the program.
Recently, however, a Northwest credit union received a check from the IRS for almost $7,000 for the 2011 tax year.
“Almost $7,000 from the IRS for filling out form 8941,” said Mark Freels, president and CEO of Teamsters Council #37 Federal Credit Union. “That’s easy money in my book.”
Or as Debie Keesee, president and CEO of Spokane Media FCU stated, “Credit unions only have to do a few parts of the 990T and fill out Form 8941, neither form is complex and only take a little time. We received $1,100 back from the IRS for less than 45 minutes of time to fill out the forms. Everyone would consider that well worth the time investment.”
The tax credit is available only to smaller credit unions, and credit unions must meet certain requirements to qualify. First, the credit union must pay premiums for employee health insurance coverage under a qualified plan. Second, the credit union must have fewer than 25 full-time equivalent (FTE) employees for the tax year. And third, the credit union must pay an average of less than $50,000 per FTE.
The current maximum credit of 25 percent of insurance premiums paid, which will increase to 35 percent in 2014, will go to credit unions with 10 or fewer FTE and average annual wages of $25,000 or less. The calculation for the tax credit phases out as the credit unions’ FTE count and average salary increase.
Both state and federal credit unions may receive the refundable tax credit, which could mean the IRS sends the credit union a check in the mail. To file a claim for the credit, credit unions must complete the IRS Form 8941 and fill out the newly revised Form 990-T, which adds line 44f.
“Based on head counts, over 100 Northwest credit unions may qualify for this tax credit,” said Northwest Credit Union Association (NWCUA) Director of Compliance Services David Curtis. “And receiving a tax credit could go a long ways when you have limited resources.”
Credit unions that think they may be eligible should seek detailed information from their accountants or tax advisors. Credit unions wishing to learn more about this credit should check out the Small Business Health Care Tax Credit: Detailed Analysis that is available in the Tax Issues Channel of InfoSight. The InfoSight page contains some background on the credit, an easy formula to determine if your credit union is eligible, and links to the various IRS forms.
In addition, more information is available from the IRS regarding Form 8941, Credit for Small Employer Health Insurance Premiums.
Questions? Contact the Compliance Hotline: 1.800.546.4465, firstname.lastname@example.org.
Posted in Compliance.