Tax season is upon us, which can be an incredibly stressful time for small business owners who aren’t incredibly familiar or comfortable with filing taxes. Even personal taxes can be confusing and overwhelming, so if you’re trying to file for your company, there are a lot of factors that go into the process. Because there are so many, we’re going to focus this blog on whether your business is eligible for a health care tax credit. We know that for a small business, it’s essential that you save as much money as possible. Companies everywhere take advantage of tax credits as a money-saving method, but how do you know if you’re eligible?
At National PEO, we want to clear up any of the confusion relating to health care tax credits. And while we’re at it, we want to take payroll tax filing off your plate as well. Our payroll services can ensure that everything is done correctly, will be filed on time, and most importantly, will give you the time you need to focus on growing your business.
Let’s Dive Into Small Business Health Care Tax Credits
One of the big things you need to know about health care tax credit eligibility is SHOP (Small Business Health Options Program). If you own a small business or a non-profit, you are eligible only if all of the following apply:
- If you have fewer than 25 full-time (FTE) employees.
- The average employee salary is around $50,000 a year, or less.
- If your company pays at least 50 percent of the full-time employees’ premium costs.
- SHOP coverage is offered to all of your full-time employees. You don’t need to provide this option to dependents or part-part employees (those who work less than 30 hours per week) to qualify for the tax credit.
This seems pretty straight forward, right? If you need more information right away, here are some additional facts to help you out. If you have any further questions, you can always get in touch with someone at National PEO and our payroll services, we are more than happy to help you understand the process.
- For small businesses, your company needs to pay half of your full-time employees’ premium costs. However, if you are a tax-exempt company, you only need to pay 35 percent.
- The small business tax credit is only available for two consecutive taxable years beginning in 2014 and beyond.
- Small businesses typically need to purchase a Qualified Health Plan from a Small Business Health Options Program Marketplace to be eligible for the tax credit.
How Will the Tax Credit Make a Difference?
What you really want to know is how much money will you get back, right? Well, there isn’t a definitive answer to this because it depends on certain factors, including how many employees you have, what their salaries are, and what percentage of their premiums your company pays. However, the credit is based on a sliding scale, so if you have a smaller business (less than 10 full-time employees and the average wage is less than $25k), you will receive a bigger credit.
Don’t Owe Taxes This Year?
According to the Internal Revenue Service, if your company doesn’t owe taxes for the year, you can roll the credit over to next year, or roll it back to previous tax years. In addition, when you’re paying higher premiums than what the amount of the credit is, you can also claim a business expense deduction for the excess.
How to Claim the Tax Credit
When you are filing your taxes, use Form 8941 to calculate the amount of the credit. Add the amount as part of your general business credit on the income tax return if you are a small business. If you’re a tax-exempt company, add the amount of line 44f of the form 990-T (Exempt Organization Business Income Tax Return).
Tax credits can be confusing and overwhelming, especially when filing taxes correctly is so important for a company, whether it’s a small business or a non-profit. At National PEO, our payroll services can make the process easy. With our PEO and ASO services, you can be confident knowing that our team has everything under control.
Here’s some of what National PEO can do for you:
- Withhold and submit your payroll tax payments.
- Manage payroll tax filing paperwork.
- Help employees adjust their withholding.
With April 15th coming up quickly, it’s important to get a head start filing taxes and making sure that it’s done right. When you have a to-do list that keeps getting longer, don’t stress out about filing your taxes and trying to make sure you’re getting the best return possible. National PEO wants you to focus on growing your company, not filing your taxes. With our payroll services and tax filing help, you can put your time and effort into what matters, and we’ll take over the human resources responsibilities.
Give us a call today to learn more about how our payroll services can help.