IRS gives tax break to small employers

If you are a small business you may be eligible to receive tax breaks from the Internal Revenue Services before 2014 when the Small Business Health Exchange Program (SHOP) will be implemented.

Small businesses are eligible if they:

  • Provide health insurance to employees.
  • Have fewer than 25 full-time-equivalent employees who make, on average, less than $50,000 annually.
  • Contribute at least 50 percent of total premium cost.

Businesses that have 10 or fewer full-time-equivalent employees, who make, on average, less than $25,000 annually, will receive the maximum tax credit of 35 percent. The credit is phased down for businesses with up to 24 employees. To determine full-time-equivalent employees, employers can use one of three methods, whichever method is benefits them the most. The three methods are total actual services or estimates based on total days or weeks of services.

You may have received a postcard from the IRS if you are one of the small businesses eligible. To provide assistance to businesses that are not eligible for the tax break, the IRS is offering a transition period. This means businesses can take the tax credit this year, and meet the requirements next year.

Small business can take the tax credit for ancillary products, such as dental and vision insurance, as well as health insurance. The tax credit can be used from 2010 to 2013, and for any two additional years after that.

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