Small Business Health Care Tax Credit Information

Below is a recently issued letter from SBA Administrator, Karen Mills, regarding the new Health Care Tax Credit for small businesses.  This letter provides information about claiming the tax credit and answers questions about the Affordable Care Act for small businesses.

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SUBJECT: One Page Form for Health Care Tax Credit for Small Businesses

December 2, 2010
Dear Small Business Owner,

As I’ve traveled the country this year, I have heard from many of you who are looking forward to the new tax credits, health insurance exchanges, and other tools that will help you provide health insurance coverage to your employees as a result of the Affordable Care Act.

The most immediate benefit of the new law is a tax credit that will help America’s smallest employers and nonprofit organizations (less than 25 full-time equivalent employees with average annual wages below $50,000) who have been hit hardest by premium increases in recent years.  Today, I’m pleased to announce that the Administration is releasing a one-page form and instructions (available at http://www.irs.gov/newsroom/article/0,,id=231928,00.html?portlet=7) on how to claim this credit for the 2010 tax year.   In addition, new guidance released today answers questions that many of you have asked related to: your current contribution arrangements, eligibility for certain religious institutions, and participation by multiemployer health and welfare plans. In each case, the Administration has worked to ensure that a broad range of small businesses can qualify.

These credits are available for tax years 2010 through 2013 and for any two years after that.  Through 2013, the maximum tax credit is 35 percent of premiums paid by small employers and 25 percent for eligible tax-exempt organizations.  Beginning in 2014, those levels increase to 50 percent and 35 percent, respectively.  Importantly, these credits are just one of many benefits in the Affordable Care Act.  Most notably, in 2014, firms with up to 100 workers will be able to pool their buying power and reduce their administrative costs by purchasing coverage through a health insurance exchange.

Finally, the new law strengthens America’s entrepreneurial spirit, overall.  For example, it outlaws discrimination against those with pre-existing conditions, giving more Americans the ability to break out of “job lock” and start their own companies.  The new law also prohibits insurance companies from dramatically increasing premiums for a small business just because one worker gets sick.

Overall, the Affordable Care Act is a critical tool that will help millions of small business owners provide health insurance to people who you often consider to be members of your extended family – your employees.  As a nation, we owe you nothing less as you work to grow, create jobs, and lead us toward full economic recovery.

Warm regards,
Karen Mills
SBA Administrator

Important Health Care Tax Credit Info for Small Businesses

SBA PRESS OFFICE

10/27/10

Administrator Karen Mills of the U.S. Small Business Administration has written an open letter to small business owners across the United States explaining immediate benefits available to small businesses as part of the Affordable Care Act. 

  

Dear Small Business Owner,

For decades, access to affordable health insurance has been the number-one concern of small business owners.  To help you address that concern and provide quality, affordable coverage for your employees, the new Affordable Care Act gives you a number of new tools and benefits.

The most immediate benefit you should know about is the tax credit to help you pay for up to 35 percent of your employee premiums starting this tax year.  An estimated 4 million small businesses may qualify for these tax credits, totaling about $40 billion over the next 10 years.  Go here to learn more about the tax credit, including new information that explains how this federal credit is in addition to state-level credits you might receive and how dental and vision coverage are also eligible for the federal credit.

The Affordable Care Act also included reporting requirements if you pay another business $600 or more starting with 2013 filings.  Small business groups have voiced concerns about the possible burden this places on people like you.  That’s why the IRS is already planning to exempt from this requirement your transactions that use credit and debit cards.  Also, the IRS, SBA and others in the Administration are looking for additional ways to minimize burdens and avoid duplicative reporting.  We welcome your comments and input as we move forward together to address implementation issues under the new law. 

Over the last 16 months, this Administration has taken steps to provide tax relief that put more money in the hands of small business owners like you – including write-offs for new equipment, credits for hiring unemployed workers and capital gains exclusions for small business investors. We know that sensible tax relief like this will help you grow your business, create new jobs, and continue drive America’s economic recovery.

With warm regards,

Karen Mills

Novel Approach to Health Plans Gains Traction with Small Businesses

As the Obama administration wrestles with how to expand health-care coverage to millions of uninsured Americans, some local organizations are finding creative ways to help cover one of the most affected groups — employees of small businesses.

The programs typically involve collaboration between business owners, nonprofit groups and local hospitals, which offer enrollees a range of medical services at a reduced rate. The plans keep costs down partly by bypassing the extra costs that come with traditional insurance. That can be a big help for small-business employees who can’t afford traditional insurance.

Small-business employees make up a disproportionate share of the country’s uninsured. Some 15% of U.S. residents, or about 46 million people, were uninsured as of 2007, the latest data available, according to the Census Bureau. Meanwhile, 32% of workers at U.S. companies with fewer than 25 employees were uninsured in that year, and 21% of employees at firms with 25 to 99 workers had no coverage, according to the Kaiser Family Foundation.  Click HERE to read more about these new health care coverage ideas.