1. We pledge to be approachable, available and understandable.
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2. CONTENT
Page1
Tax Credit to Subsidize Health Insurance
Premiums for Small Businesses
Page2
Small Business Tax Credits: It’s Time to
Take Out Your Calculator!
Page3
Tax Credit, Is it worth your time?
Page4
Do I Qualify for the Credit?
Page5
Are You Eligible for a Subsidy?
Page6
Health Insurance Premiums that do not
qualify!
Page7
Health Insurance Premiums that do not
qualify!
Page8
Qualifying Arrangements Explained:
Health Insurance 201
Page9
Small Business Health Insurance Subsidy
Read the Fine Print
RiverCity Benefits 417 Pearlstone Ct Roseville, CA 95747

3. Tax Credit to Subsidize Health Insurance
Premiums for Small Businesses
After talking with our small business clients, we realize that
most of them are not even aware of the availability of the
Small Business Tax Credit. We understand the importance
of this credit and we thought it would be good for every
small business owner to find out if they qualify for this
benefit.
We have read the IRS Notices and Instructions on how to obtain the subsidy for health insurance premiums that is available
to Small Businesses.
This subsidy applies to businesses with these 3 simple criteria
• Less than 25 Full Time Employees (FTE’s)
• Employees average less tehn 50,000 in annual wages
• As an employer you paid at least 50% of the employees Health Insurance premiums
As a small business owner myself, I know that every bit of savings that we take advantage of these days helps us keep our
business running and puts food on our table at home. I hope the information contained in these blogs help you and your
business to continue to survive.
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4. Small Business Tax Credits: It’s Time to
Take Out Your Calculator!
Small business is the backbone of this country and it pays the majority of the taxes. We built this
country on the sweat and hard work of small businesses just like yours, and that trend will only
continue. Small business has provided opportunity for immigrants and citizens alike to grow wealth
and provide their families with prosperity the American way. And now with the new health care
reform, a whole new opportunity opens up for the small business owner.
The challenges to their future prosperity grow every year. Cost increases and government regulation
create challenges to small business trying to remain fiscally sound. Especially being in a state such
as California where the cost of doing business is more expensive than
the rest of the country, small business owners have to be creative, think quickly and operate outside
of the box to maintain their livelihood.
How Will the Tax Credit Benefit You?
This tax credit can be an incredible boost to your bottom line, if you take the time and conduct the proper due diligence. To understand the impact,
during tax years 2010 through 2013, the maximum credit realized by small business is 35%, with a rate of 25% for small, tax-exempt employers, such as
charities. The great news for small business is the changes announced by the IRS for 2014. Upon implementation, small business will enjoy a 50% tax
credit and a 35% tax credit for those charities. This will be a significant financial advantage for small businesses. A small business that pays $50,000 a
year towards workers health care premiums (and qualifies for a 15% tax credit) can save $30,000 between 2010-2013. This is a significant savings for
a small business, and gives an owner options for growth that they may not have anticipated otherwise.
For a small business employer who did not owe tax, you have the flexibility to carry your credit forward or back to other tax years. Having that flexibility
is significant. Additionally, since the health care premiums are larger than the credit, you may still claim a business expense for the premium in excess
of the credit amount. Small business can thus enjoy both a credit and a deduction for health care premiums paid. The small tax-exempt employers can
similarly benefit from the program by getting the credit in the form of a refund, as long as it does not exceed your withholding tax or Medicare tax
liability. Remember, you may still file an amended return to take advantage of this tax credit.
Example for a California Business
You operate a business in California with eight full time employees. Their average salary is $24,000 per FTE. Four of your employees are enrolled in
single-coverage insurance and the other four have family coverage.
For all, you pay 50% of the premiums. Total premiums are $3,000 for single coverage (you pay $1,500), and $8,000 for family coverage (you pay $1,500
of employee only premium).
Due to the equality and percentage of payments you make, you qualify for a credit on the premiums. However, you need to determine the amounts of
the premiums that qualify for the credit. In order to do that, compare the amount you paid against the average premium for the small group market in
California.
The average premium for single coverage in California is $4,999 – so because you are paying 50% of the employee only premium, the limit is based on
50% of the start market premiums, so in this case it would be $2,499.50 for employee only coverage.
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5. Tax Credit, Is it worth your time?
We have obtained a chart from the Congressional Research Service Report
“Summary of Small Business Health Insurance Tax Credit under PPACA” dated
April 5th 2010 that estimates the percentage of a tax credit you may receive
through Obamacare. This chart summarizes worksheets 5 through 7 of the
Instruction for Form 8941
There is a reduction in the percentage of premiums you will receive
as a tax credit if you are over 10 employee’s or have average
annual wages more than $25,000. You will not receive the full 35%
tax credit.
You should be able to take a quick glance to determine
if you want to do the paperwork to find out exactly how
much is available as a credit for you small business.
The IRS calculates the time required to figure out this tax credit as:
• Record Keeping – 12 hours 46 Minutes
• Learning about the law – 1 hour 23 minutes
• Preparing and Sending the form – 2 hours 48 minutes
Based upon this chart, we still think several of our clients will be able to claim a respectable portion of this available tax credit.
By no means do we think everyone will be able to claim this Tax Credit.
Tax Credit Employee Size and Wage Calculator 2010-2013
Tax Credit Employee Size and Wage Calculator 2014
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6. Do I Qualify for the Credit?
So as you can see, the impact of this exciting tax credit is significant to the bottom line of your business, so let’s see if you can claim it. Use this IRS
Worksheet that outlines three simple steps to see if you qualify:
• There should be no fewer than 25 full-time equivalent employees
(FTEs).
• Employees must have an average wage of less than $50,000
annually.
• You must pay at least 50% of the cost of single rate cover for
each of your employees.
Those three facts are reasonable, but commonly misunderstood by many. The IRS defines an FTE as anyone who works 30 hours per week or more,
calculated monthly. Employee hours are added together, and then divided by 120 to get your FTE count Finally, the smaller the business, the bigger
the tax credit earned. By using the measures provided, if your small business has more than 10 FTEs or the average wage is more than $25,000, the
amount of tax credit will be lower. If you need assistance determining if your small business or tax exempt organization qualifies for the credit, read
the IRS Form for the three simple steps.
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7. Are You Eligible for a Subsidy?
With the new health care benefit comes due diligence on behalf of the small business
owner. As with so many other IRS requirements, things may become convoluted or
confused when trying to interpret their guidelines.
We will try and define three elements you may use to determine eligibility for this
government subsidy.
You are an eligible for a subsidy as a small employer for the tax year if you meet the following
three requirements:
• You paid premiums for employee health insurance: A qualifying arrangement of a uniform percentage of 50% of the
employee’s premium cost. In addition, composite billing or uniform premium may qualify, even if it is less than 50%.
• 25 full-time equivalent employees (FTEs) for the tax year: You may be able to meet this
• requirement even if you had 25 or more employees.
• Annual average wages for the tax year of less than $50,000 per FTE: Determined by taking your total gross salaries
and divide by the number of FTEs.
Variances in these numbers may affect your total tax credit or your ability to qualify. The higher the FTE count and the average annual wage, the lower
your credit percentile.
How Do You Define an Employee?
Excluded Employees
Typically, anyone performing services for you during the tax
period and are used to determine your annual average wage,
are considered employees for this calculation. In general, all
employees who perform services for you during the tax year
are taken into account in determining your FTEs.
The following individuals are not considered employees when you figure this credit.
Hours and wages of these employees and premiums paid for them are not counted
when you figure your credit:
These guidelines should give you a clear outline as to how to
classify your workforce in order to determine eligibility for this
tax credit. The health care bill offers a multitude of options for
small business owners to explore, so it’s important to follow these
guidelines carefully so you don’t miss out.
• The owner of a sole proprietorship.
• A partner in a partnership.
• A shareholder who owns (after applying the section 318 constructive
ownership rules) more than 2% of an S corporation.
• A shareholder who owns (after applying the section 318 constructive
ownership rules) more than 5% of the outstanding stock or stock possessing
more than 5% of the total combined voting power of all stock of a
corporation that is not an S corporation.
• A person who owns more than 5% of the capital or profits interest in any
other business that is not a corporation.
• Family members or a member of the household who is not a family member
but qualifies as a dependent on the individual income tax return of a person
listed above. Family members include a child (or descendant of a child), a
sibling or step sibling, a parent (or ancestor of a parent), a stepparent, a
niece or nephew, an aunt or uncle, or a son-in-law, daughter-in-law, fatherin-law, mother-in-law, brother-in-law, or sister-in-law. A spouse is also
considered a family member for this purpose.
• Employees consider seasonal employees who work less than 120 days
during the tax year, however, any insurance premiums must be included in
your calculations.
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8. Health Insurance Premiums that do not qualify!
Obama’s health care plan offers many choices for the small business owner in California. You
might be asking yourself just how to qualify your health insurance premiums with all the new
information available.
When considering this question, keep in mind that premiums you paid under a qualifying
arrangement for individual employees will be counted when figuring this credit. If your state
offers a tax credit or subsidy, do not reduce the amount you paid for consideration. Similarly,
if your state pays a premium directly to the insurance provider, include that amount in the
consideration for the amount of premium for this tax credit. Remember to consider the actual
amount you pay in and understand what qualifies for this tax credit. It is only the specific amount
paid by the employer, and does not include any portion paid by the employees.
According to the IRS Instruction Form 8941, to qualify as health insurance coverage, it should
meet the following criteria:
• Health insurance coverage means benefits consisting of medical care (provided directly, through insurance or
reimbursement, or otherwise) under any hospital or medical service policy or certificate, hospital or medical service
plan contract, or health maintenance organization contract offered by a health insurance provider.
• A health insurance provider is either an insurance company or another entity licensed under state law to provide
health insurance coverage.
Health insurance coverage also includes coverage under the following plans:
• Limited scope dental or vision plans.
• Long-term care plans or nursing home care plans.
• Home health care plans.
• Community-based care plans.
• Coverage only for a specified disease or illness.
• Hospital indemnity or other fixed indemnity insurance.
• Medicare supplemental health insurance.
• Certain other supplemental coverage.
• Similar supplemental coverage provided to coverage under a group health plan.
• Any combination of the above.
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9. Health Insurance Premiums that do not qualify!
Obama’s health care plan offers many choices for the small business owner in California. You
might be asking yourself just how to qualify your health insurance premiums with all the new
information available.
When considering this question, keep in mind that premiums you paid under a qualifying
arrangement for individual employees will be counted when figuring this credit. If your state
offers a tax credit or subsidy, do not reduce the amount you paid for consideration. Similarly,
if your state pays a premium directly to the insurance provider, include that amount in the
consideration for the amount of premium for this tax credit. Remember to consider the actual
amount you pay in and understand what qualifies for this tax credit. It is only the specific amount
paid by the employer, and does not include any portion paid by the employees.
Health insurance coverage does not include the following benefits:
• Coverage only for accident, or disability income insurance, or any combination thereof.
• Coverage issued as a supplement to liability insurance.
• Liability insurance, including general liability insurance and automobile liability insurance.
• Workers’ compensation or similar insurance.
• Automobile medical payment insurance.
• Credit-only insurance.
• Coverage for on-site medical clinics.
• Similar insurance coverage, specified in regulations, under which benefits for medical care are secondary or incidental
to other insurance benefits.
Because the coverage must be offered by a health insurance provider as described in the above list, health
insurance coverage does not include benefits provided by:
• Health Reimbursement Arrangements (HRAs)
• Flexible Spending Arrangements (FSAs)
• Coverage Under Self-Insured Plans
• Health Savings Accounts (HSAs)
The Health Care Reform Act brings a lot of new concerns to the table for small businesses. Be sure to read through these carefully. Any and all
qualifying situations should be included in the premiums paid for this tax credit consideration.
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10. Qualifying Arrangements Explained: Health
Insurance 201
Qualifying Arrangement what could this
possibly mean????
With the new health care reform legislation, there seems to be so much more
information to learn. Just how does one sort through it?
We’ve broken down each aspect of how a California small business owner qualifies
for these tax credits, hopefully making you a little more familiar the health care
benefit and how it impacts you. Now, we can delve a little further into some of the
details regarding how you qualify for these tax credits.
How Does One Qualify For Tax Credits?
We discussed earlier the basic requirements to receive these tax credits. To refresh your memory these include:
• Premiums paid for employee health insurance: A qualifying arrangement of a uniform percentage of 50% of the
employee only premium cost. In addition, composite billing or uniform premium may qualify, even if it is less than 50%.
• 25 full-time equivalent employees (FTEs) for the tax year: You may be able to meet this
• requirement even if you had 25 or more employees.
• Annual average wages for the tax year of less than $50,000 per FTE: Determined by taking your total gross salaries
and divide by the number of FTEs.
Qualifying Arrangements Broken Down
Let’s delve into the term “qualifying arrangements” specified in the first point. Qualifying employers must pay their premiums under a “qualifying
arrangement.” What is this “qualifying arrangement” you ask? Designated by the IRS (IRS Notice 2012-82), it stipulates that:
• Employers must pay a uniform percentage of no less than 50% of the premium cost of coverage for each employee
in the designated plan.
• Each premium must be paid for through a specified insurance company or HMO.
Small business owners can benefit from the credit through other types of insurance besides major medical (such as dental, vision, and others).
However, plans for each employee must meet the qualifying arrangement standard independently. Plans cannot be aggregated together (for example,
a medical insurance plan is separate from a vision plan)
Only premiums paid under the qualifying arrangement are counted in the calculation of the credit. It’s important to understand that the amount of credit
you can claim under the qualifying arrangements is limited by three aspects:
• The number of employees in your company and their annual salaries
• Average premiums for the small market group in California
• Amount of taxable income
Small business owners can benefit from the credit through other types of insurance besides major medical (such as dental, vision, and others).
However, plans for each employee must meet the qualifying arrangement standard independently. Plans cannot be aggregated together (for example,
a medical insurance plan is separate from a vision plan)
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11. Small Business Health Insurance Subsidy
Read the Fine Print
Obamacare’s insurance and benefits will certainly bring a number of changes to the
way small business owners handle their businesses and health insurance. With this
in mind, it is important to do your due diligence and understand the limitations on
any credits you can receive as a small business owner. This is especially important
in California, where laws on running businesses vary differently from other states.
Average Health Insurance Premiums for Small Business
As we discussed in our blog post about qualifying arrangements, the amount of credit a business owner can receive under qualifying arrangements
is limited by three factors, one of which is what the average premiums are for the small market group (small business) in a particular state. For our
example, we will refer to California.
According to the IRS, your credit is lowered if the employer premiums paid are more than the employer premiums that would have been paid if
those considered employees enrolled in a plan with a premium equal to the average premium for the small group market in the specific state where
the employee works.
The amount of premium payments is limited to the smaller of:
• The average premium for the small group market in California
• The amount the business owner has actually paid
The Department of Health and Human Services (HHS) determines the average premium in the small market group for each state. Refer to
IRS Form 8941-2012 for specific amounts in each state (for California, the amount for employee only coverage is $4,999, family coverage is $12,161).
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13. Meet our team
David Brown
• Health and Life Insurance Representative Licensed April 2000
• Insurance Agent (Auto, Home, Business) 2003
• University of Phoenix 2001-2003 – Business
• US Navy Veteran 1990-1999
Erin Brown
• Office manager, Customer Service and Human Resources
Representative
• Professional Human Resources (PHR) certification 2007
• Graduate of California State University, Sacramento in 2002
• BS in Business, with a concentration in Human Resources
10 years of experience in Human Resources
in various industries
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14. (916) 543-9500
(916) 543-9500
RiverCity Benefits, 417 Pearlstone Ct, Roseville, CA