Category Archives for "Employer Benefits"

Five Facts about the Small Business Health Care Tax Credit

If you are a small employer, there is a tax credit that can put money in your pocket. The small business health care tax credit benefits employers that:
• offer coverage through the small business health options program, also known as the SHOP marketplace
• have fewer than 25 full-time equivalent employees
• pay an average wage of less than $50,000 a year
• pay at least half of employee health insurance premiums
Here are five facts about this credit:
• The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
• To be eligible for the credit, you must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program Marketplace, or qualify for an exception to this requirement.
• The credit is available to eligible employers for two consecutive taxable years beginning in 2014 or later. You may be able to amend prior year tax returns to claim the credit for tax years 2010 through 2013 in addition to claiming this credit for those two consecutive years.
• You can carry the credit back or forward to other tax years if you do not owe tax during the year.
• You may get both a credit and a deduction for employee premium payments. Since the amount of your health insurance premium payments will be more than the total credit, if you are eligible, you can still claim a business expense deduction for the premiums in excess of the credit. For more information, see the small business health care tax credit page on IRS.gov.

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Averaging Full-time and Full-time Equivalent Employees and Why it Matters

For purposes of the Affordable Care Act, employers average their number of employees across the months in the year to see whether they will be an applicable large employer. This is important to do because two provisions of the health care law apply only to ALEs and are now in effect. These are the employer shared responsibility provision and the employer information reporting provision for offers of minimum essential coverage. In addition, self-insured ALEs – that is, employers who sponsor self-insured group health plans – have additional provider information reporting requirements.

Remember that the vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.

Here are definitions to three terms that are significant in determining whether your organization is an ALE. In general:

A full-time employee is an employee who is employed on average, per month, at least 30 hours of service per week, or at least 130 hours of service in a calendar month.
A full-time equivalent employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee.
An aggregated group is commonly owned or otherwise related or affiliated employers, which must combine their employees to determine their workforce size.
To determine if your organization is an applicable large employer for a year, count your organization’s full-time employees and full-time equivalent employees for each month of the prior year. If you are a member of an aggregated group, count the full-time employees and full-time equivalent employees of all members of the group for each month of the prior year. Then average the numbers for the year. Employers with 50 or more full-time equivalent employees are applicable large employers and will need to file an annual information return reporting whether and what health insurance they offered employees. In addition, they are subject to the Employer Shared Responsibility provisions.

There are many additional rules on determining who is a full-time employee, including what counts as hours of service. For more information on these rules, see the employer shared responsibility final regulations and related questions and answers on IRS.gov.

For more information, see the Determining if an Employer is an Applicable Large Employer page on IRS.gov/aca.

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Below is a quick snippet from the IRS about the HIRE Act which allows for a tax credit for hiring unemployed workers.

HIRE Act   Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire certain previously unemployed workers (“qualified employees”).   The first, referred to as the payroll tax exemption, provides employers with an exemption from the employer’s 6.2 percent share of social […]

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