IRS Issues Guidance on Tax Credit for Small Employers

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The Internal Revenue Service Dec. 2 provided final guidance on the small employer tax credit included in health care reform legislation under tax code Section 45R.

Notice 2010-82 answers questions that stemmed from guidance issued earlier this year in Notice 2010-44 (61 BTM 163, 5/25/10), IRS said in an accompanying news release.

The notice clarifies that religious institutions providing coverage to employees through denominational organizations are able to qualify for the credit, IRS said. Small businesses that cover employees through multiemployer health and welfare plans and employers subsidizing health care costs of employees through certain contribution arrangements also can qualify for the credit, IRS said.

The new notice amplifies Notice 2010-44, which laid out the three main qualifications employers need to satisfy to qualify for the credit. Notice 2010-44 also instructed employers on how to calculate employees' hours worked and which employees could be taken into account for the credit.

Also Dec. 2, the Treasury Department issued a fact sheet highlighting key components of the guidance and the benefits for small businesses.

The Section 45R tax credit, effective for taxable years beginning in 2010 through 2013, is designed to encourage small employers to offer health coverage for the first time or to maintain coverage they already provide. The tax credit was included in the Patient Protection and Affordable Care Act that President Obama signed into law March 23.

IRS also Dec. 2 issued the final version of Form 8941, Credit for Small Employer Health Insurance Premiums, and its instructions. Small businesses and tax-exempt organizations will use the form to calculate the small business health care tax credit when filing income tax returns next year, IRS said in the news release.


Form 8941 is at http://www.irs.gov/pub/irs-pdf/f8941.pdf.