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Business Tax

IRS Releases 2017 Form 8941 for Claiming Small Business Health Care Tax Credit

EBIA  

EBIA  

Form 8941 (Credit for Small Employer Health Insurance Premiums) and Instructions (2017)

The IRS has released the 2017 version of Form 8941, which is used by eligible small employers to calculate their health care tax credit. As background, the small business health care tax credit generally is available to employers that have fewer than 25 employees, pay average annual wages of less than $50,000 (indexed for inflation), and contribute a uniform percentage of at least 50% of the premium costs for employee health insurance coverage obtained through a Small Business Health Options Program (SHOP) Exchange. The maximum tax credit is generally 50% of employer-paid premiums (35% for tax-exempt eligible small employers) and is available only for two tax years, which must be consecutive (see our Checkpoint article). Once calculated, the tax credit is claimed as a general business credit on Form 3800 (or, by tax-exempt small employers, as a refundable credit on Form 990-T).

If the taxpayer confirms on line C that it claimed a credit in 2014 or 2015, a Form 8941 cannot be filed in 2017. References to the filing year have been updated along with the use of the adjusted applicable maximum annual wages amount of $53,000. [EBIA Comment: Although the inflation-adjusted threshold for 2017 is $52,400 (see our Checkpoint article), the rounding rule required for calculating average annual wages results in $53,000 being the effective limit for purposes of the 2017 Form 8941.]

The instructions note that due to a state innovation waiver granted to Hawaii, employers in Hawaii cannot participate in the SHOP Exchange or claim the credit for plan years beginning after 2016—although eligible employers with non-calendar-year-plans can claim the credit for the portion of the 2016 plan year that continues into 2017. The instructions still include the transition relief under IRS Notice 2016-75 for eligible employers in the three Wisconsin counties without 2016 SHOP coverage, since eligible employers with non-calendar-year plans can claim a tax credit for the portion of their 2016 plan year that wraps into 2017 (see our Checkpoint article). As in previous years, the instructions identify the information needed to calculate the tax credit, and include worksheets to determine the number of employees, average wages, and average premium for the small group health insurance market for each state where the employer has employees. Finally, the table of average premiums, by county, for all 50 states plus the District of Columbia has been updated for 2017. (An employer’s credit may be reduced if the employer pays premiums greater than the average for the small group market for the state in which its employees work.)

EBIA Comment: In November 2017, HHS proposed regulations that would remove a number of SHOP requirements for enrollment through an online SHOP and allow groups to enroll directly through a SHOP insurer or SHOP-registered agent or broker (see our Checkpoint article). Under this proposal, the small business health care tax credit would continue to be available to qualifying employers utilizing direct enrollment through a simplified eligibility determination on Healthcare.gov for SHOP participation. For more information, see EBIA’s Health Care Reform manual at Sections XXI.D (“Small Business Health Options Program (SHOP)”) and XXVI (“Small Business Health Care Tax Credit”).

Contributing Editors: EBIA Staff.

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