On Tuesday, September 7, 2010, the Internal Revenue Service released a draft of the Form 8941 to be used by eligible small employers (including eligible tax-exempt entities) for calculating their small business health care tax credit under Section 45R of the Internal Revenue Code for the 2010 tax filing season. Small employers using the Form are then instructed to report the calculated credit as part of their general business credit on their regular income tax return for the year. Tax-exempt entities should report their calculated credit on a Form 990-T. (Form 990-T has yet to be revised for this purpose.)
The small business health care tax credit generally is available for small employers with less than twenty-five (25) full-time equivalent (FTEs) employees who are paid less than $50,000 in average annual wages. The maximum amount of this health care tax credit is available only for small employers with ten (10) or less FTEs who are paid $25,000 or less in average annual wages. The health care tax credit is phased out for employers with between ten (10) and twenty-five (25) FTEs and/ or who pay average annual wages of between $25,000 and $50,000 per year to such employees. Note that small employers with part-time help may qualify for the health care tax credit, even if the employers employ more than twenty-five (25) employees because the tax credit is based upon full-time equivalencies. (IRS Notice 2010-44 provides more information regarding which employers may be eligible for the small business health care tax credit.)
The final version of Form 8941, along with instructions, is projected to be available before the end of the year.