Friday, August 19, 2011

The Affordable Care Act is working to lower costs for small businesses

The Affordable Care Act is working to lower costs for small businesses and gives them more choices. Small businesses are the engine of our economy, and the Affordable Care Act provides the tools necessary to help them succeed. It levels their playing field with larger companies and provides tax breaks to make it possible for them to offer employees’ health care.
Before, insurance companies charged small businesses in the individual market an average 18 percent more in premiums than larger businesses. The Affordable Care Act lowers health costs for small businesses by allowing them to band together in health exchanges that will be created in each state.
A prospective entrepreneur who has a preexisting medical condition or a family member with a preexisting condition cannot leave his or her job to launch a new company because they are “locked” in their old job and health coverage—and 1.6 million small business workers suffer from this. But under the Affordable Care Act people will have affordable access to coverage, and workers can choose the job they want.
Before the Affordable Care Act passed the Small Business Majority found health care costs were rising so much that it would cost 178,000 jobs by 2018. Right now, 4 million small businesses have access to tax credits to help with the cost of health premiums. Those savings can be used to invest in job creation. 82 percent of the American people support these small business tax credits, according to a new Kaiser Family Foundation poll.
You can claim some important information about taking advantage of the tax credits. Please visit the IRS website directly for more information and forms.
Below is a reprinting of some important information about claiming the small business tax credits.
Eligibility Rules
  • Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
  • Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
  • Average annual wage. A qualifying employer must pay average annual wages below $50,000.
  • Both taxable (for profit) and tax-exempt firms qualify.
Amount of Credit
  • Maximum Amount. The credit is worth up to 35 percent of a small business’ premium costs in 2010 (25% for tax-exempt employers). On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
    Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Three Simple Steps for Employers to Qualify
To determine if your small business or tax exempt organization qualifies for the small business health care tax credit, follow the three simple steps on the IRS fact sheet.
Claiming the Credit
Small employers, whether businesses or tax-exempt organizations, will use new Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the small business health care tax credit.
Small businesses will include the amount of the credit as part of the general business credit on their income tax returns.
Tax-exempt organizations will include the amount of the credit on Line 44f of revised Form 990-T, Exempt Organization Business Income Tax Return. Form 990-T has been revised for the 2011 filing season to enable eligible tax-exempt organizations –– even those that owe no tax on unrelated business income –– to claim the small business health care tax credit.

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