You may have already heard about the so-called “tanning tax” that went into effect July 1, charging indoor UV parlors a 10 percent excise charge. That tax is part of several provisions that passed in the Affordable Care Act that became law in March, and some may apply to your company. They include:
The Small Business Health Care Tax Credit
Generally, employers that have fewer than 25 full-time equivalent (FTE) employees and pay wages averaging less than $50,000 per employee per year may qualify for this credit, targeted to help employers with low and moderate income workers afford to offer employees health insurance coverage. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, employers that have more than 25 individual workers may also qualify if some of their workers are part-time.
For each year from now through 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011.
To determine if your business qualifies for this credit:
1) Count the total number of your employees (not counting owners or family members). If fewer than 25, then …
2) Calculate the average annual wages of employees (again, not counting owners or family members). If the result is less than $50,000, and …
3) You pay at least half of the insurance premiums for your employees at the single (employee-only) coverage rate, then you may be able to claim the credit.
Health Coverage for Employees’ Older Children
Health coverage for an employee’s children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various workplace and retiree health plans. These changes allow employers with cafeteria plans (plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits) to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.
Employees who have children who will not have reached age 27 by the end of 2010 are eligible for the new tax benefit, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child.
Therapeutic Discovery Project Program
This program is designed to provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support jobs and increase U.S. competitiveness. IRS guidance describes the process by which firms can apply to have their research projects certified as eligible for the credit or grant. Applications must be postmarked no later than July 21, 2010.
More information on the Affordable Care Act can be found at the IRS website at http://www.irs.gov/newsroom/article/0,,id=220809,00.html.
For more details on how the act affects your business, please call a member of CAI’s Advice and Counsel team at (919) 878-9222 or (336) 668-7746.
Photo Source: a.drian