How to Claim a Small Business Health Care Tax Credit

Last week, we asked if your small business was eligible for a health care tax credit. Today, we’re going to answer some of your questions about obtaining that tax credit.

How does an employer claim the credit?
If you’re a small business owner, you can claim the credit on your annual income tax return. You’ll also need to attach Form 8941, Credit for Small Employer Health Insurance Premiums. This form shows your calculation of the credit.

If an employer’s tax-exempt, how would they claim the credit?
If you’re a tax-exempt business, as described in sections 501(c) and 501(a), you can claim the credit by filing Form 990-T (Exempt Organization Business Income Tax Return) with Form 8941. Even if your business doesn’t normally file Form 990-T, you’ll need to file this form to claim the credit.

Can I use this credit to offset my alternative minimum tax (AMT) liability?
Yes; the short answer is that the credit can be used to offset your AMT liability. However, this is subject to certain limitations based on the amount of your regular tax liability in addition to your AMT liability and other allowable credits. For the long answer, consult section 38(c)(1) of the IRS’s Internal Revenue Code.

Can the credit be reflected in determining my estimated tax payments for the year?
Yes, another short, sweet answer directly from the IRS.

Does taking the credit affect my deduction for health insurance premiums?
Again, yes. When you determine your allowable deduction for health insurance premiums, you’ll need to subtract the amount of the credit from the amount of premiums that can be deducted. This way, you can claim both a credit and partial deduction for the same premium payments.

E-filing with ExpressIRSForms
Remember: today’s the last day to e-file your ACA return with the IRS and still be considered on time. You can e-file your ACA forms through your ExpressIRSForms account. And if you have any questions, we’re available by phone (704-684-4751) and live chat Monday through Friday, 9:00 a.m. to 6:00 p.m. ET. We’re also available 24/7 at support@ExpressIRSForms.com.

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Determining Full-Time Employees Under the Affordable Care Act

This week, we’ve been talking primarily about how to properly calculate the amount of full-time equivalent employees (FTEs) you have working for you and their total number of hours worked as well as average annual wages as directed by the IRS. But as you begin looking at your employees, you may find yourself asking if there are certain workers that you should consider in your totals. So today we’re going to take a look at whether or not certain employees should be included in your total full-time employee count.

Seasonal Workers
When calculating your employees’ hours, seasonal workers generally will not factor into your total FTE count or average annual wage. Seasonal workers only perform labor or provide services on a seasonal basis, like retail workers who’re employed exclusively during holiday seasons. According to the IRS, it’s up to you to determine by a “reasonable, good faith interpretation of the term ‘seasonal worker’” who your seasonal workers are. Just keep in mind that if your seasonal worker provides services for more than 120 days during the year, they will need to be included in your total count.

Part-time Employees
Unlike seasonal workers, part-time employees are included in your total FTE count and average annual wage for the tax year. So include them when you’re tallying up your employees’ hours to determine how many FTEs you employ.

Leased Employees
Leased employees, like temps, are those employees you have who aren’t employees of your company but are providing services for your company through an agreement you’ve made with the organization who leases their services. When you calculate your FTE total and average annual salary, you will need to include your leased employees.

E-filing with ExpressIRSForms
Be sure to hurry and submit your ACA return with ExpressIRSForms as soon as possible - the deadline is tomorrow, June 30! If you have any questions or need assistance with your filing, you can contact our expert support team by live chat or phone (704-684-4751) Monday through Friday, 9:00 a.m. to 6:00 p.m. ET or send us an email anytime to support@ExpressIRSForms.com.

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Full-Time Employee Service Hours: How to Add Them Up

Yesterday, we gave you the basic formula for calculating your employees’ total hours worked so that you could assess how many full-time equivalent employees (FTEs) you employ. It’s important to know the exact number of FTEs working for you for the sake of filing your Affordable Care Act return. When totaling your employees’ hours worked, you’ll want to make sure you’re calculating them in one of the three IRS-allowed ways to ensure your ACA compliance.

Before we get down to the types of calculation, let’s clarify what’s included in hours of service. Obviously, it’s hours spent working by the employee, but hours of service also include hours for which the employee is paid for:

• vacation or holiday,
• illness or incapacity (including disability),
• layoff,
• jury duty, and
• military duty or leave of absence.

When calculating your total hours of service, do not include hours for seasonal employees (who work less than 120 days).

Actual Hours Worked
The most straight-forward method, the Actual Hours Worked calculation method determines the actual hours of service from records of hours your employees worked and were paid. So if your payroll records indicate an employee worked 2,000 hours and was paid for an additional 80 hours (for vacation, holiday, and illness leave), the employee would have worked 2,080 hours of service for the year.

Days-Worked Equivalency
If you use the Days-Worked Equivalency method, you’ll credit an employee with eight hours of service for each day the employee was required to work at least one hour of service, including hours of paid leave. In other words, if you use this method and you have an employee who works from 8:00 a.m. to 12:00 p.m. each day for 200 days, the employee would be credited with 1,600 hours of service (8 hours for each day worked, multiplied by 200 days).

Weeks-Worked Equivalency
This method is a little similar to our previous one, only it goes by weeks instead of days. When you use the Weeks-Worked Equivalency method, you credit an employee with 40 hours of service for each week for which payment is made or due (including weeks of paid leave). For example, if you have an employee who worked 49 weeks and took two weeks of vacation with pay, the employee must be credited with 2,040 hours of service (51 weeks x 40 hours/week).

E-filing With ExpressIRSForms
When you e-file with ExpressIRSForms, you have access to our full-time employee calculator, making your ACA e-filing that much easier. To get started, just create an account, then follow the steps to generate and e-file your forms. If you run into any problems or have a question, you can give our expert customer service team a call at (704) 684-4751 Monday through Friday, 9;00 a.m. to 6:00 p.m. ET or send us an email anytime to support@ExpressIRSForms.com.

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How to Determine Average Annual Wages of Your Full-Time Employees

Whether or not you need to file Forms 1094-C and 1095-C is determined by your total number of full-time employees. The average annual wages you pay your employees also figures into your ACA compliance, so it’s important to be able to correctly calculate not only your total of full-time employees but their collective wages as well.

What is a Full-Time Equivalent Employee (FTE)?
A full-time equivalent employee (FTE) is an employee whose hours of paid service equal or exceed the 30-hour per week full-time standard for employees as outlined by the IRS. An FTE can be one employee who works more than 30 hours a week, or can be made up of two or more part-time employees whose combined hours exceed 30 hours.

Who is Considered an Employee when Determining FTEs and Average Annual Wage?
Generally, all of your employees will be taken into consideration when determining your FTE total and average annual FTE wages. This includes employees who terminated employment during the tax year, employees covered under a collective bargaining agreement, and employees not enrolled in your health care coverage.

Can I be Counted as an Employee if I Own My Small Business?
No. Additionally, the following individuals are not considered employees for the purposes of the credit:

• Any other owners of the business, like sole proprietors, partners, or shareholders who own greater than 2% of an S corporation or 5% of a C corporation
• Spouses of the owners
• Family members of the owners, including children, grandchildren, [step] siblings, [step] parents, nieces/nephews, aunts/uncles, son/daughter-in-laws, father/mother-in-laws, brother/sister-in-laws
• Spouses of family members of the owners

How is the Number of FTEs Determined?
To determine your FTEs:

1. Add up the total hours of service you pay wages to employees during the year (not to exceed 2,080 hrs/employee).
2. Divide that amount by 2,080.
3. If necessary, round to the next lowest whole number. If your result is less than one, round up to one.

Example: An employer pays five employees for 2,080 hours each and three employees for 1,040 hours each:

1. (5 x 2,080) + (3 x 1,040) = 13,520
2. 13,520 / 2,080 = 6.5
3. The employer has six FTEs

How are the Average Annual Wages Determined?
When determining the average annual wages, all wages paid to employees, including overtime, are taken into consideration:

1. Add up the total wages you paid during the taxable year to your employees.
2. Divide that by the number of FTEs you had during the year.
3. If necessary, round your result down to the nearest $1,000.

Example: An employer pays a total of $224,000 in wages to employees and has 10 FTEs.

1. $224,000 / 10 = $22,400
2. The employer’s average annual wages are $22,000

E-filing with ExpressIRSForms
Parts of the ExpressIRSForms e-filing process for ACA forms include a full-time employee calculator and multiple error checks to ensure your return is ACA compliant. Create an account today to get started. If you need any help, you can give our customer support staff a call at (704) 684-4751 or send us a live chat Monday through Friday, 9:00 a.m. to 6:00 p.m. ET. We also provide 24/7 email assistance at support@ExpressIRSForms.com.

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Is Your Small Business Eligible for a Health Care Tax Credit?

Enacted in 2014, there’s a federal law that gives a tax credit to small employers who become eligible by providing health care coverage to their employees. This is something you’ll want to pay attention to for your Affordable Care Act return as well as other IRS filings.

Who Gets the Tax Credit
In order to be eligible for a small business health care tax credit, small employers, including tax-exempt organizations, must:

• have fewer than 25 full-time employees, whose average annual wages are less than $50,000 and
• pay a uniform percentage equal to at least 50% of the premiums for employee-only insurance coverage for all employees.

Keep in mind that your part-time employees add together to make full-time employee equivalents when you’re totaling your full-time employees. You’re also required to contribute toward premiums on behalf of each employee enrolled in the qualified health plan (QHP) you offered through a Small Business Health Options Program (SHOP Marketplace).

Calculating the Tax Credit
When calculating your credit, only premiums paid for your employees by you (the employer) for QHPs offered through SHOP are counted, beginning with the tax year 2014. If you have taxable years 2010 through 2013 to report, you may count premiums paid by you for coverage under a qualifying arrangement. For any tax year, these situations are not counted toward your tax credit:

• Health reimbursement arrangement (HRA) payments,
• Health flexible spending arrangement (FSA) payments,
• Health savings account (HSA) payments, and
• Employee tobacco surcharges paid by the employer under certain SHOP plans.

And a Friendly E-filing Reminder
While figuring up your small business health care tax credit, don’t forget the e-filing deadline for your ACA return is next Thursday, June 30, 2016. Make sure you have your forms transmitted through ExpressIRSForms by June 29 to ensure the IRS receives them on time. If you have any questions, our friendly support staff is here to help! Just give us a call Monday through Friday, 9:00 a.m. to 6:00 p.m. EDT, at (704) 684-4751 or send us an email anytime to support@ExpressIRSForms.com.

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Reporting Covered Individuals on Form 1095-B

In order to complete Form 1095-B, filers must include information on covered individuals. These are the individuals who were not directly offered an insurance plan but who still benefit from the health care coverage: spouses and dependents.

Form 1095-B: Lines 23-28
Lines 23 through 28 make up Part IV of Form 1095-B, which is where information about the covered individuals is reported. On these lines you’ll include:

• the covered individual’s name,
• their social security number,
• or their date of birth if you don’t have their SSN,
• and indicate which month(s) they were covered.

To help make sure all of your information is present and accounted for before you e-file, get started with ExpressIRSForms today! Our built-in error checks help to make sure you have everything filled out accurately before anything gets filed with the IRS.

If you have any questions about the e-filing process, give our expert customer support staff a call! We’re available Monday through Friday, from 9:00 a.m. to 6:00 p.m. EDT, at (704) 684-4751. We also offer 24/7 email assistance at support@ExpressIRSForms.com.

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What is the Origin of Policy for ACA Reporting?

There’s a lot of important information reported to the IRS on your 1095-B Forms regarding the offers of health care coverage you made throughout the year. Included in the information you’re required to provide is the origin of the policy, which is entered on Line 8 of Form 1095-B.

When you come to Line 8 of Form 1095-B, you’ll enter a letter (A-F) to indicate where the health insurance policy you offered your recipients originated:

• A. Small Business Health Options Program (SHOP)
• B. Employer-sponsored coverage
• C. Government-sponsored program
• D. Individual market insurance
• E. Multiemployer plan
• F. Other designated minimum essential coverage (MEC)

ExpressIRSForms helps make sure you have the right information in the right places on all of your ACA Forms, including 1094 and 1095-C Forms. So get started e-filing your ACA forms through your ExpressIRSForms account today - you only have a little over a week left to get them e-filed to the IRS!

If you have any questions, we’re available by live chat and phone (704-684-4751) Monday through Friday, 9:00 a.m. to 6:00 p.m. EDT. We also offer 24/7 assistance through support@ExpressIRSForms.com.

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