Millions of small employers received postcards from the IRS last Spring that alerted them to the new small business health care tax credit and encouraged them to check their eligibility. Perhaps your church did not receive this notice because it does not file a tax return. Even if you didn’t receive a postcard, your church still may be eligible.
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.
• Church 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.
Amount of Credit
• Maximum Amount. The credit is worth up to 25 percent of a church’s premium costs in 2010. On Jan. 1, 2014, this rate increases to 35 percent.
• Phase-out. The credit phases out gradually for churches with average wages between $25,000 and $50,000 and for churches with the equivalent of between 10 and 25 full-time workers.
The church will use new Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the health care tax credit. It will then include the amount of the credit on Line 44f of revised Form 990-T, Exempt Organization Business Income Tax Return. Form 990-T (draft available for viewing) will be 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 health care tax credit.
This could be money in your church’s pocket! Let PSK assist you in determining if your church qualifies for the health care tax credit. www.pskcpa.com.
