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IRS Releases 2015 Version of Form 8941 and Instructions for Claiming Small Business Health Care Tax Credit

Form 8941 (Credit for Small Employer Health Insurance Premiums) and Instructions (2015)

Form 8941


Visit the Health Care Reform Community on Checkpoint to join the discussion on this development (for Checkpoint subscribers to EBIA’s Health Care Reform manual).

The IRS has released the 2015 version of Form 8941, which is used by eligible small employers to calculate their health care tax credit. By way of 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. The maximum tax credit is generally 50% of premiums paid (35% for tax-exempt eligible small employers, subject to a reduction for sequestration). 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).

The 2015 version of Form 8941 is virtually unchanged from 2014, other than references to the filing year and use of the updated maximum annual wages amount of $52,000. [EBIA Comment: Although the inflation-adjusted threshold for 2015 is $51,600 (see our article), the rounding rule required for calculating average wages results in $52,000 being the effective limit for purposes of 2015 Form 8941.] 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. The instructions incorporate the transition relief that permits direct enrollment for employers in certain Iowa counties without 2015 Small Business Health Options Program (SHOP) coverage, created by IRS Notice 2015-08. The list of average premiums, by county, for all 50 states plus the District of Columbia has been updated for 2015. (These averages are relevant because an employer’s health care tax 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: Despite outreach efforts by the IRS and HHS, the small business health care tax credit has been under-utilized and the requirement, since 2014, that coverage generally must be through the SHOP Exchange has likely reduced the number of employers taking advantage of the credit. What’s more, starting in 2014, the tax credit is available to eligible small employers for a maximum of two consecutive tax years, making 2015 the last year some employers are eligible for the credit. 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.