Smart Benefits: Why Aren’t More Companies Taking Small Business Tax Credit?
Monday, April 11, 2016
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.
Related Slideshow: 20 Ways To Support Small Businesses in Central MA
Grab Some Coffee
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.
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
Take a Break
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!
Grab Some More Lunch
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
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
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.
Grab a Drink
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
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.
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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