IRS Pushes Small Business Health Care Tax Credit

by Mary Swire, Tax-News.com, Washington

09 September 2011

United States Internal Revenue Service (IRS) Commissioner Doug Shulman has announced a new round of outreach to small employers, and the professional service providers they rely on, to encourage them to review the new Small Business Health Care Tax Credit (SBHCTC) to see if they are eligible.

"As the filing deadlines approach, we want to make sure that small business owners don't leave any money on the table,” said Shulman. “Small businesses that offer health insurance should learn about this credit and claim it if they are eligible."

The SBHCTC was included in the Affordable Care Act enacted in 2010. Small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be eligible for the tax credit. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ 25 or fewer workers with average income of USD50,000 or less.

It was said that small employers face two important tax filing deadlines in coming weeks. Corporations that file on a calendar year basis, and have requested an extension to file to September 15, can calculate the SBHCTC and claim it as part of the general business credit, while, sole proprietors, partners and S-corporation shareholders who have requested an extension have until October 17 to complete their returns. In addition, tax-exempt organizations that file on a calendar year basis and requested an extension to file to November 15 can also then claim the credit.

As these 2010 tax return deadlines approach and businesses begin planning for the end of 2011 and 2012, the IRS confirmed that its new outreach campaign will focus on working with the tax software industry to help alert small employers and practitioners when taxpayers may be eligible for the SBHCTC.

It will also contact insurance agents, brokers and carriers who work with small businesses to help ensure that participants in the health insurance marketplace understand the features and benefits of the credit; as well as the small business and tax practitioner community to provide additional opportunities to learn about the credit.

The IRS’s new outreach effort will also remind businesses who have already filed that they can still claim the credit. For small businesses that have already filed and later determine they are eligible for the credit, they can always file an amended 2010 tax return.

In addition, businesses without a tax liability this year can also still benefit. The Small Business Jobs Act of 2010 provided that, for the 2010 tax year, eligible small businesses may carry back unused general business credits (including the SBHCTC) for five years. Previously these credits could only be carried back one year. Businesses that cannot use the credit in 2010 can therefore claim it in future years.

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