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Health Care and Small Business

Small Business Learning Center

SBA's Online Business Chat

A live Q&A session with small business experts. Submit your question before or during the chat discussion. You cannot submit question after Closing Remarks for the chat. No registration is needed for the web chat.

Expert:  John Tuzynski
Health Care and Small Business

John Tuzynski

Chief of Employment Tax, Internal Revenue Service

Friday, October 5, 2012 3:45 PM

 John Tuzynski is the chief of Employment Tax and Specialty Programs for the Small Business Self-Employed Division (SB/SE) of the Internal Revenue Service. He is currently leading implementation of the Affordable Care Act for SB/SE. Tuzynski has national program responsibility for employment tax policy and field operations in SB/SE. He is responsible for federal compliance with employment tax laws and is actively working on a number of major national initiatives (both pre-filing and post filing) to increase compliance in this area. Tuzynski has 19 years of tax compliance experience with the IRS.

Before joining IRS, Tuzynski was an accounting manager for a group of related companies with common ownership. He was responsible for compliance activities including return filing, preparation of Forms W-2 and 1099, payroll processing in multiple states, and all compliance activity associated with a payroll function. Tuzynski holds a bachelor's degree in accounting from the Penn State University.

The next SBA Web chat will center on the topic of 'Health Care and Small Business," to focus on how the Affordable Care Act will benefit small businesses, including new tax incentives and provisions.

Chat participants can get answers to their questions about how the Affordable Care Act will impact their small business, learn more about the tax credits they can take advantage of, and how tax relief can help their business.

Note: There is not an audio format for the online chat, and no broadcast capability. SBA moderators retain editorial control over the online discussions and choose the most relevant questions for chat participants and hosts. Chat hosts may decline to answer questions.

 

Chat Transcript

From : U.S. Small Business Administration
Location : Washington , D.C.
Question :

 

Reply :
Are you a small business owner providing health insurance coverage for your employees? You may be eligible for a new credit that helps small businesses and small tax-exempt organizations afford the cost of covering their employees. Find out more about eligibility rules, the maximum amount of credit and how to claim it in today’s Web Chat. Welcome to everyone one joining us today. -John
From : Robin Senser
Location : Cincinnati , OH
Question :
We have several temporary employees that work anywhere from 6-9 months of the year. According to our personnel policies, they don't qualify for health insurance benefits. How do they figure into the calculation of these tax credits, or do they at all?

 

Reply :
Thank you for your question. For purposes of computing the Small Business Health Care Tax Credit and the requirements for average annual wages and the number of full time equivalent employees, hours of service worked by, and wages paid to, seasonal workers are not taken into account unless the worker works for the employer on more than 120 days during the tax year. Given your scenario, you will need to use them in your computation.
From : George R Rea, Jr
Location : Meridian , MS
Question :
Kiplinger reports that the medical insurance information reported on the W-2 will increase taxable income. I do not think this is true.

 

Reply :
George, you are corrrect - The requirement to report the aggregate cost of employer sponsored coverage on the W-2 does not increase taxable income,
From : Computer guy
Location : ,
Question :
FYI...there may be some folks on this chat who are not seeing the progression of questions. Remind them that they need to hit the "refresh" button to bring up the next question on the screen

 

Reply :
Please note, so you have the latest hit REFRESH
From : Anthony Palmer
Location : Cleveland , Ohio
Question :
Does the Small Business Health Care Tax Credit have an expiration or sunset date?

 

Reply :
Anthony - the 35% credit goes till 2013 and actually increases to 50% in 2014. There is no sunset (expiration).
From : M. Dorsey
Location : Glendale , California
Question :
I've been seeing a lot about the small business Health Care Tax Credit. As a very small business owner I am quite concerned. What does this mean for my business and what credits apply to me? Can you tell me more?

 

Reply :
This credit was designed for small businesses like yours. Small employers that provide health care coverage to their employees and that meet certain requirements generally are eligible for this credit. The credit is 35% of the health insurance premiums you pay for your employees. In order to be a qualified, you must, (1) have fewer than 25 full-time equivalent employees (“FTEs”) for the tax year, (2) the average annual wages of your employees for the year must be less than $50,000 per FTE, and (3) you (the employer) must pay the premiums under what is considered a “qualifying arrangement”. The credit is available for tax years beginning in 2010, so it is available now and is reported on your tax return to be filed next year. For additional information, please visit www.irs.gov and click on the affordable care act tax provisions link noted in the center of our homepage.
From : megan johnson
Location : centerville , utah
Question :
i have a dog grooming bussfor 15 year and have 3 three employees. i would love to provide them with health insurance . how would i go about that? but so that i could afford it.

 

Reply :
Thank you for your question. The Small Business Health Care Tax Credit I just discussed is a great way to lower your cost of heath coverage for your 3 employees. If you qualify, you will be immediately eligible for this new tax credit which is reported on your tax return next year.
From : James McComb
Location : Columbia , SC
Question :
Are there going to be changes Section 125 / Section 105 that will affect small businesses?

 

Reply :
For tax years beginning January 1, 2011 certain small businesses (which employ an average of 100 or fewer employees on business days during either of the 2 preceding years) may establish what is known as a “simple cafeteria plan.” I believe this is what your are referring to. So, if the plan meets certain contribution, eligibility, and participation requirements for any year, it shall be treated as meeting any applicable non-discrimination requirement during such year. The employer shall be required to make a contribution on behalf of each qualified employee in an amount equal to—(1) a uniform percentage (not less than 2%) of the employee’s compensation for the year, or (2) an amount which is not less than the lesser of 6% of the employee’s compensation for the plan year, or twice the amount of the salary reduction contributions of each qualified employee. Eligibility and participation requirements shall be met if, under the plan, all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate, and each employee eligible to participate in the plan may, subject to terms and conditions applicable to all participants, elect any benefit available under the plan. Look for more on our website on this in the coming months
From : Curt
Location : Spokane , WA
Question :
I am a S Corp can this credit be applied on my personal tax return

 

Reply :
Yes, Curt, it will flow to your persoanl return like other general business credits. IRS is revising the forms to be used next year.
From : Jewell Ward
Location : Greensboro , NC
Question :
Which employers are eligible for the small employer health care tax credit?

 

Reply :
Jewell - I think we covered most of this, but I did want to mention that this applies to tax exempts under 501(c). For tax exempts the credit is 25% and there is a limit based on payroll taxes paid.
From : Selina
Location : ,
Question :
How will the Affordable Care Act benefit Small businesses

 

Reply :
Selina - the Small Business Health Tax Credit, which we discuseed, Expanding coverage to individuals that can be covered tax-free on their parents health insurance beginning shortly, the SIMPLE Cafeteria plans for small employers are just a few of the benefits that will impact small businesses and their owners.
From : Esther
Location : ,
Question :
Must an employer supply healthcare. Can the employee pay the premium?

 

Reply :
Esther - generally the employer must pay at least half the cost of the insurance. So, the employee can pay some of the premium. The employer can take the credit on the premiums they pay.
From : Mike Joe
Location : Washington , D.C.
Question :
Hi, John. Q. What are the most important questions that the IRS expects to answer in coming weeks and months about how employers can take advantage of the credit? Thanks!

 

Reply :
Mike - we will be coming out with the Form and instructions that you will use to calculate the credit, so stay tuned.
From : Warren Daniel
Location : Rochester , NH
Question :
Is employer contribution figured on an annual basis? It is my understanding that the credit is worth up to 35% of employer contribution. What are the requirements and the tiers that give a credit less than 35%? If a company has full time and part time employees, how does one arrive at the number of full time employees?

 

Reply :
Thank you for your question. Notice 2010-44 provides detailed guidelines, illustrated by more than a dozen examples, to help small employers determine whether they qualify for the credit and estimate the amount of the credit. This Notice may be accessed on www.IRS.gov by clicking on the following link: http://www.irs.gov/pub/irs-drop/n-10-44.pdf
From : Mittie Grayson
Location : Springfield , New Jersey
Question :
Will the tax credit be allowable as a carryforward to charge against future taxes? If so, for how long may it be carried forward?

 

Reply :
Thank you for your question. The Small Business Health Care Tax Credit is a component of the general business credit (Code Section 38) and as such any unused amount can be carried forward for 20 tax years.
From : Julia Rhoads
Location : Clearwater , FL
Question :
Are part time employee's eligible

 

Reply :
Julia, because the limitation on the number of employees is based on FTEs, an employer with 25 or more employees could qualify for the credit if some of its employees work part-time. For example, an employer with 46 half-time employees (meaning they are paid wages for 1,040 hours) has 23 FTEs and therefore may qualify for the credit. I hope you find this information helpful.
From : Russ Haddad
Location : Wilson , NC
Question :
As Director of Economic Development for Rep. GK Butterfield, what would be the best way to get this information to small businesses in the district?

 

Reply :
Russ, thank you for your question. You may consider providing a link to www.IRS.gov on Congressman Butterfield's web site and provide instructions to click on the Affordable Care Act Tax Provisions link noted in the center of the home page.
From : Tony
Location : Des Moines , IA
Question :
everyone talks aobut the tax credit but I am unsure how this will be applies to a "S" Corp, LLC, or a sole proprietorship - please expain

 

Reply :
Tony - this applies to all small businesses regadless of return type. So, it applies to sole props filing a Schedule C, corps that file and 1120, and flow-throughs (to the partners, S/H's).
From : Jim Houser
Location : Portland , Oregon
Question :
As an employer (C corp) with fewer than 25 FTE's, are my wages included in the calculation of average wages?

 

Reply :
Jim, your wages are not included in the calculation.
From : Chris
Location : Washington , DC
Question :
So if the employees make more than $50,000 - we can not take advantage of this tax credit?

 

Reply :
Chris - the average annual wages must be less than $50,000 so some employees can make more, and some less. Check our FAQ #11 on our website for more detail.
From : Peg
Location : LaSalle , IL
Question :
Do you have to pay for health ins. for all employees? When does the credit start?

 

Reply :
Peg - the credit starts now for insurance payments made in 2010 that are claimed on your return to be filed in 2011. The credit is computed on the premiums you pay.
From : T. Scheid
Location : Columbus , Ohio
Question :
I understand that as the owner of a small business I may not be able to count myself or premiums for my coverage, but can still calculate the credit for my staff. Can I still claim my own premiums as a business expense?

 

Reply :
Yes, you can still take the credit for your staff. For your premiums, you can deduct them as usual.
From : M Hodgdon
Location : Bristol , Maine
Question :
Are the tax credits dependent upon the structure of your company (i.e. Sole Prop, LLC, S Corp, C Corp, etc.)?

 

Reply :
M - check out or FAQ's. Number 1 goes into more detail.
From : Curt
Location : Spokane , WA
Question :
If I have no tax liability this year can I carry this credit forward

 

Reply :
Curt, you can carry it forward for 20 years.
From : U.S. Small Business Administration
Location : Washington , D.C.
Question :

 

Reply :
Thanks everyone for participating. We at the IRS will take back some of the questions we were not able to get to and will try to get additional information out on irs.gov in the coming months. Thanks again.