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Smart Benefits: Why Aren’t More Companies Taking Small Business Tax Credit?

Monday, April 11, 2016

 

Businesses with fewer than 25 full-time employees who make an average of less than $50,000 ($51,800 in 2016) may qualify for the Small Employer Health Care Insurance Tax Credit, established under the ACA, if they cover at least 50 percent of the cost of workers’ individual premium costs and offer coverage through the SHOP marketplace. 

The tax credit is worth up to 50% of an employer’s contribution (up to 35% for tax-exempt employers). It is available to eligible employers for two consecutive taxable years. Even if a business didn’t owe tax during the year, it can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for premiums in excess of the credit.

So why are only a fraction of eligible businesses taking the credit? 

According to a March Government Accountability Office report, only about 181,000 employers in 2014 claimed the credit, a relatively low number compared to the number of employers eligible for the credit, which GAO estimated to be between 1.4 million and 4 million. 

The reasons GAO cited for the limited participation:

  • The maximum amount of the credit doesn’t appear to be a large enough incentive for employers to offer or maintain insurance. 
  • Few small employers qualify for the maximum credit amount. 
  • For those employers who do claim the credit, the credit amount “phases out” to zero as employers employ up to 25 full time equivalent (FTE) employees at higher wages. 
  • The amount of the credit is also limited if premiums paid by an employer are more than the average premiums for the small group market in the employer’s state. 
  • The credit can only be claimed for two consecutive years after 2013. 
  • The cost and complexity involved in claiming the tax credit is significant. 
  • Many small businesses are unaware of the credit. 

 

To learn more about the credit and whether a business is eligible, the IRS offers information here. Businesses must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. Tax-exempt organizations should include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. The Form 990-T must be filed to claim the credit even if an organization doesn’t ordinarily do so.

Rob Calise is the Managing Director, Employee Benefits. of Cornerstone|Gencorp, where he helps clients control the costs of employee benefits by focusing on consumer driven strategies and on how to best utilize the tax savings tools the government provides. Rob serves as Chairman of the Board of United Benefit Advisors, and is a board member of the Blue Cross & Blue Shield of RI Broker Advisory Board, United HealthCare of New England Broker Advisory Board and Rhode Island Business Healthcare Advisors Council. He is also a member of the National Association of Health Underwriters (NAHU), American Health Insurance Association (AHIA) and the Employers Council on Flexible Compensation (ECFC), as well as various human resource associations. Rob is a graduate of Bryant University with a BS in Finance.
 

 

Related Slideshow: 20 Ways To Support Small Businesses in Central MA

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Grab Some Coffee

Talyta’s Café

20 Front St., Worcester MA

Talyta’s Café has you covered for the most important meal of the day!

Grab some Huevos Rancheros, and egg burrito, or go all out with their breakfast special piled high with home fries, eggs, and toast before you head out to shop your Saturday away.

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Grab a Snack

Bahnan’s International Marketplace

344 Pleasant St., Worcester, MA

Don’t have time to sit down to breakfast? Bahnan’s International Marketplace, Bakery and Café is a family-owned business that offers meat pies, fresh breads and some sweet pastries to grab on the go!

They also have a selection of imported teas and coffees to get your morning started.

Photo: Bahnan's International Marketplace

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Shop for Dad

Shack’s 

446 Main St., Fitchburg, MA

Get dad the gift of looking like a million bucks with a tailored outfit from Shack’s.

They specialize in men’s fine clothing including sports coats and trousers and tailoring is free with purchase!

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Shop for Mom

The Hidden Jewel

72 Shrewsbury St., Worcester, MA

The Hidden Jewel has beautiful handmade jewelry, apparel for the office and on-the-go, and the best part is most of their wares are made in the US!

Photo: The Hidden Jewel

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Shop for Someone Special

Mark Gerard’s Therapeutic Massage

21 West St Worcester, MA

Mark Gerard’s Therapeutic Massage offers Reiki, deep Swedish massages, and deep tissue therapy massages to give that special someone in your life some relaxation.

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Shop for a Difficult Buy

Union Music

142 Southbridge St., Worcester, MA 

Give that difficult person to buy for in your family the gift of music!

Union Music offers music lessons, instruments, and repairs at their full-service music shop.

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Take a Break

ArtsWorcester 

660 Main Street, Worcester, MA 

ArtsWorcester hosts exhibits from local artists and promotes them to the public.

Admission into the gallery is always free of charge and they sell art that can suit most budgets.

Support local art on Small Business Saturday with ArtsWorcester!

Photo: ArtsWorcester

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Grab Some More Lunch

Armsby Abbey

144 Main St, Worcester, MA

Armsby Abbey offers delicious comfort food and a wide selection of Farmstead cheeses to enjoy with their house-baked breads.

Armsby also has delicious sandwiches and soups to warm you up after a blustery shopping day. 

Photo: Armsby Abbey

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Even More Lunch!

Mezcal Tequila Cantina

20 Central St. Leominster, MA

Add some spice to your day at Mezcal Tequila Cantina.

Come for the guacamole and salsa bar and stay for the generously portioned entrees like their Adobo Chicken Enchiladas and Pulled Pork Tostadas!

Photo: Mezcal Tequila Cantina

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Do Something Creative

EcoTarium

222 Harrington Way, Worcester, MA

EcoTarium makes learning science a fun experience.

The museum offers memberships - a great gift idea for the children in your family- and Science Discovery Programs daily.

Photo: EcoTarium

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Participate in and Event

Small Business Saturday at Annie's Book Shop

Annie's is taking Small Business Saturday to the next level by featuring the Worcester Writers Collaborative, a local organization supporting writers throughout Worcester County, in a collection of readings, signings, and more from 12:00 PM  6:00 PM.

Click here for more information

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Get Some Retail Therapy

Exclusives

39 Pleasant St., Worcester, MA

Exclusives has on-trend fashions for men and women and carries an eclectic selection of music and media!

College students can also save an extra 10% off their purchases. 

Photo: Exclusives

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Repair Your Shoes

Central Shoe Repair of  Worcester

37 Mechanic St., Worcester, MA

Central Shoe Repair of Worcester repairs everything from leather soles, boots, high heels and even purses.

Central Shoe Repair will help you keep your fashionable wares in tact! 

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Revitalize Your Space

Rotman's 

725 Southbridge St., Worcester, MA 

Need to perk up your living space for the season?

Head into Rotman's where you can find new carpets, furniture, lighting and more. 

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Go Golfing

Auburn Driving Range

541 Southbridge st. Auburn MA 

Get some exercise and test your skills at Auburn Driving Range.

Take lessons to improve your golf game or play for fun, and Ladies' Night is every Saturday with half priced buckets. 

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Get Ready For a Special Occassion

Isaac's Alterations

63 Auburn St., Auburn, MA

Isaac's Alterations offers a wide selection of dresses for your next wedding, birthday celebration, or  formal event.

They also offer alterations, show and handbag repair on site to keep you looking your best!

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Relax Your Body and Mind

Yoga Mandala

750 Main St, Winchester, MA 

Yoga Mandala offers yoga courses for yogis of all ages and abilities.

Choose from “Core Strengthening and Conditioning” or Barre- inspired courses or purchase a package for someone on your Christmas list!

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Grab a Drink

Compass Tavern

90 Harding St., Worcester, MA

Grab a locally crafted beer or seasonal cocktail at The Compass Tavern.

The tavern is home to the largest bar in Worcester - seating 48 at any given time.

Grab some food and begin your weekend at Compass Tavern! 

Photo: Compass Tavern

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Feed Your Sweet Tooth

La Patisserie

30 Church St., Winchester, MA 

Feed your sweet tooth with a decadent dessert at La Patisserie.

Grab a red velvet cupcake, éclair or lemon bar and treat yourself after a busy shopping day. 

Photo: La Patisserie

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Watch the Game

Whiskey on Water 

97 Water St, Worcester

Looking for that perfect place to watch the big football games over the weekend. Whiskey on Water is exactly where you want to be. 

Their 32-tap system will feature Worcester largest selection of local and craft and bottled beer. Food will continuously evolve with New England’s first rotating food truck service.

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Grab A Late Night Snack

The Banner Bar and Grille

112 Green Street, Worcester

The Banner Bar and Grille is one of the best spots around to get late-night post-bar favorites like nachos piled high with chicken or chili, wings, and melty quesadillas.

The Banner also features music from local DJs every weekend night so you can have your snake and get some entertainment!

 
 

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