What tax-exempt organizations need to know about IRS Form 8941 and the new small-business healthcare tax credit.
The IRS has released a draft version of Form 8941, the form that small businesses and tax-exempt organizations will use to calculate the small-business healthcare tax credit when they file returns next year.
Small businesses will include the amount of the credit on their income tax returns. Tax-exempt organizations will claim the credit on Form 990-T, which is currently used to report and pay taxes on unrelated business income and will be revised for the 2011 filing season to enable eligible tax-exempt organizations to also claim the healthcare tax credit.
For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small-business employers and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will go up to 50 percent of premiums paid by eligible small-business employers and 35 percent of premiums paid by eligible tax-exempt employers. The maximum credit goes to smaller employers—those with 10 or fewer full-time employees paying average annual wages of $25,000 or less. The credit is completely phased out for employers that have 25 employees or more or that pay average wages of $50,000 per year or more.
The final version of Form 8941 and instructions will be available later this year.