IRS releases guidance for small employers

Monday May 17, 2010

The IRS today released Notice 2010-44, providing dozens of examples and explanatory text regarding the Small Business Health Care Tax Credit. The credit is part of the The Patient Protection and Affordable Care Act of 2010 and allows small businesses to receive a tax credit not only for regular health insurance but also for add-on dental and vision coverage.

According to the IRS news release, 

"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 employers that are tax-exempt organizations. The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals. 

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011."

Additional information is available at 

This bulletin provides a general summary of recent legal developments. It is not intended to be and should not be relied upon as legal advice.

Related Information: Click here for the text of Notice 2010-44.