Small Business Tax Credits
Who is eligible for the Small Business Tax Credit?
Employers are eligible if they have 25 or fewer full-time equivalent employees (or fewer than 50 half time employees) AND average wages are less than $50,000 AND premium sharing meets certain standards (generally 50% of the health plan cost for employees).
Are non-profits eligible?
Yes, non profits may receive a small business tax credit against payroll taxes of up to 25% of the tax-exempt employer’s payment for employee health care for 2010-2013, and up to 35% for 2014-2015. The credit will be applied against payroll taxes but special rules do apply. For nonprofits the amount of credit cannot exceed the total amount of income and Medicare (i.e., hospital insurance) tax the employer is required to withhold from employees’ wages for the year and the employer share of Medicare tax on employees’ wages. The IRS has not yet determined how the non-profits will claim the credit.
What should I do if I think I may be eligible for the credit?
The credit is available for tax year 2010. The IRS has developed specific guidance on calculating the credit, determining full time equivalents and average wages, qualifying arrangements and other specifics. If a non-profit thinks it may be eligible, it should carefully review the IRS guidance on the issues:
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