How to Offer Health Coverage As a Small Business
Add up your full-time equivalent (FTE) employees., Calculate the average annual wages of your FTE employees., Purchase coverage through the Small Business Health Options Program (SHOP) marketplace and pay at least 50 percent of your employees'...
Step-by-Step Guide
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Step 1: Add up your full-time equivalent (FTE) employees.
Tax credits are available for small businesses with fewer than 25 FTE employees.
The amount of the credit decreases based in part on the number of FTE employees you have.Count the number of people, excluding seasonal employees, who worked for you an average of 30 hours or more in the most recent year.
These are your full-time employees.
When finding the number of FTE employees who work for you, how those employees are classified is irrelevant.
You should look instead at the number of hours each employee worked.
For example, you may have three employees who are classified as part-time employees, but who worked an average of 32 hours a week last year.
Those employees are considered full-time employees.
Add up the number of hours worked per week by part-time employees, and divide that number by
30.
If you get a decimal number, round it down to the nearest whole number.
Add that number to the number of full-time employees you have to get your number of FTE employees.
For example, suppose you have three full-time employees, and three part-time employees who each work an average of 15 hours a week: (15+15+15) รท 30 =
1.5 or
1.
You have four FTE employees. -
Step 2: Calculate the average annual wages of your FTE employees.
The small business tax credit is designed to most benefit businesses that have low- and moderate-income workers.
To qualify for any credit, your FTE employees must earn average annual wages of less than $50,000.Add the total amount of wages you paid to all employees, then divide that number by the number of FTE employees you have.
The result is your average annual wages.
For example, if you have four FTE employees and you paid total wages that year of $100,000, your average annual wages are $25,000.
When determining the number of FTE employees as well as their average annual wages, make sure you're using the most recent previous year of operation. , If you qualify for the tax credit, you also qualify to use the SHOP marketplace at healthcare.gov.
Coverage for your employees must be purchased through the marketplace if you want to claim the tax credit.Plans available in the SHOP marketplace are organized by metal level: bronze, silver, gold, and platinum.
Each level corresponds to a different percentage of healthcare costs covered by the plan.
For example, at the bronze level, the insurance company covers about 60 percent of the employee's healthcare costs, with the employee paying for approximately 40 percent of those costs.
You are free to choose whichever plan you want to offer your employees, or you can offer them a choice of plans from within the same metal level.
You must cover at least half of each employee's insurance premium to qualify for the tax credit.
This applies only to the employee's care, not coverage for spouses or dependents that employees may add. , If you've met all conditions for the tax credit and want to claim it on your business tax returns, you must complete IRS Form 8941, Credit for Small Employer Health Insurance Premiums.If you operate a tax-exempt organization, you still are entitled to this credit provided you meet all the conditions.
Simply include the amount you've paid for employee health insurance premiums on Line 44f of Form 990-T, Exempt Organization Business Income Tax Return.
The credit is refundable and can be carried both forward and backward to apply to taxes owed either in the past or in the future.
You also can deduct the amount of health insurance premiums you paid that exceeds the amount of the credit as ordinary business expenses.
The amount of credit to which you are entitled varies depending on the number of FTE employees you have.
At the maximum, you can get a credit equal to 50 percent of the premiums you paid.
The maximum credit available to non-profit organizations is 35 percent of the premiums paid. -
Step 3: Purchase coverage through the Small Business Health Options Program (SHOP) marketplace and pay at least 50 percent of your employees' premiums.
-
Step 4: Claim the credit on your business tax returns.
Detailed Guide
Tax credits are available for small businesses with fewer than 25 FTE employees.
The amount of the credit decreases based in part on the number of FTE employees you have.Count the number of people, excluding seasonal employees, who worked for you an average of 30 hours or more in the most recent year.
These are your full-time employees.
When finding the number of FTE employees who work for you, how those employees are classified is irrelevant.
You should look instead at the number of hours each employee worked.
For example, you may have three employees who are classified as part-time employees, but who worked an average of 32 hours a week last year.
Those employees are considered full-time employees.
Add up the number of hours worked per week by part-time employees, and divide that number by
30.
If you get a decimal number, round it down to the nearest whole number.
Add that number to the number of full-time employees you have to get your number of FTE employees.
For example, suppose you have three full-time employees, and three part-time employees who each work an average of 15 hours a week: (15+15+15) รท 30 =
1.5 or
1.
You have four FTE employees.
The small business tax credit is designed to most benefit businesses that have low- and moderate-income workers.
To qualify for any credit, your FTE employees must earn average annual wages of less than $50,000.Add the total amount of wages you paid to all employees, then divide that number by the number of FTE employees you have.
The result is your average annual wages.
For example, if you have four FTE employees and you paid total wages that year of $100,000, your average annual wages are $25,000.
When determining the number of FTE employees as well as their average annual wages, make sure you're using the most recent previous year of operation. , If you qualify for the tax credit, you also qualify to use the SHOP marketplace at healthcare.gov.
Coverage for your employees must be purchased through the marketplace if you want to claim the tax credit.Plans available in the SHOP marketplace are organized by metal level: bronze, silver, gold, and platinum.
Each level corresponds to a different percentage of healthcare costs covered by the plan.
For example, at the bronze level, the insurance company covers about 60 percent of the employee's healthcare costs, with the employee paying for approximately 40 percent of those costs.
You are free to choose whichever plan you want to offer your employees, or you can offer them a choice of plans from within the same metal level.
You must cover at least half of each employee's insurance premium to qualify for the tax credit.
This applies only to the employee's care, not coverage for spouses or dependents that employees may add. , If you've met all conditions for the tax credit and want to claim it on your business tax returns, you must complete IRS Form 8941, Credit for Small Employer Health Insurance Premiums.If you operate a tax-exempt organization, you still are entitled to this credit provided you meet all the conditions.
Simply include the amount you've paid for employee health insurance premiums on Line 44f of Form 990-T, Exempt Organization Business Income Tax Return.
The credit is refundable and can be carried both forward and backward to apply to taxes owed either in the past or in the future.
You also can deduct the amount of health insurance premiums you paid that exceeds the amount of the credit as ordinary business expenses.
The amount of credit to which you are entitled varies depending on the number of FTE employees you have.
At the maximum, you can get a credit equal to 50 percent of the premiums you paid.
The maximum credit available to non-profit organizations is 35 percent of the premiums paid.
About the Author
Andrea Thompson
Andrea Thompson is an experienced writer with over 1 years of expertise in advertising. Passionate about sharing practical knowledge, Andrea creates easy-to-follow guides that help readers achieve their goals.
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