TAX CREDITS AND DEDUCTIONS FOR BUSINESSES
Employers: Don’t Overlook the Small Business Health Care Tax Credit
Do you own or run a small business or tax-exempt group with fewer than 25 full-time employees? If you do, you should know that the Small Business Health Care Tax Credit can help you provide insurance to your employees. You may be able to save on your taxes if you paid for at least half of their health insurance premiums. Here are several things that you should know about this important credit:
If you are a for-profit business and the credit is more than your tax liability for the year, you can carry the unused credit back or forward to other tax years. If you are a tax-exempt employer, you may be eligible to receive the credit as a refund. This applies so long as it does not exceed your income tax withholding and Medicare tax liability for the year.
- Maximum Credit. For tax years beginning in 2014 and after, the maximum credit is 50 percent of premiums paid by small business employers. The limit is 35 percent of premiums paid by tax-exempt small employers, such as charities.
- Number of Employees. You may qualify if you had fewer than 25 employees who work full-time, or a combination of full-time and part-time. For example, two half-time employees equal one full-time employee for purposes of the credit.
- Qualified Health Plan. You must have paid premiums for your employees enrolled in a qualified health plan offered through a Small Business Health Options Program, or SHOP, Marketplace. There are limited exceptions to this requirement.
- Average Annual Wages. To qualify for the credit, the average annual wages of your full-time equivalent employees must have been less than $51,000 in 2014. The IRS will adjust this amount for inflation each year.
- Half the Premiums. You must have paid a uniform percentage of the cost of premiums for all employees. The amount you paid must be equal to at least 50 percent of the premium cost of the insurance coverage for each employee.
- Two Year Limit. An eligible employer may claim the credit for any two-consecutive taxable years, beginning in or after 2014. This credit can be claimed for two consecutive years, even if you claimed the credit at any point from 2010 through 2013.
- Tax Forms to Use. All employers use the Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For-profit businesses claim the credit on Form 3800, General Business Credit. Tax-exempt organizations claim it on Form 990-T, Exempt Organization Business Income Tax Return.
If you are a for-profit business and the credit is more than your tax liability for the year, you can carry the unused credit back or forward to other tax years. If you are a tax-exempt employer, you may be eligible to receive the credit as a refund. This applies so long as it does not exceed your income tax withholding and Medicare tax liability for the year.
Small Business Health Care Tax Credit
The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees.
A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. For example, two half-time employees equal one employee for purposes of the credit.
For 2013, the average annual wages of employees must be less than $50,000, and the employer must pay a uniform percentage for all employees that is equal to at least 50% of the premium cost of the insurance coverage.
The maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.
If you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years.
For small tax-exempt employers, the credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.
A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. For example, two half-time employees equal one employee for purposes of the credit.
For 2013, the average annual wages of employees must be less than $50,000, and the employer must pay a uniform percentage for all employees that is equal to at least 50% of the premium cost of the insurance coverage.
The maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.
If you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years.
For small tax-exempt employers, the credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.
Affordable Care Act Tax Provisions Effect of Sequestration on Small Business Health Care Tax Credit
Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, certain automatic cuts took place as of March 1, 2013. These required cuts include a reduction to the refundable portion of the Small Business Health Care Tax Credit for certain small tax-exempt employers under Internal Revenue Code section 45R. As a result, the refundable portion of your claim will be reduced by 8.7 percent. The sequestration reduction rate will be applied until the end of the fiscal year (Sept. 30, 2013) or intervening Congressional action, at which time the sequestration rate is subject to change.
Update:
The Health Care Law generally has no new impacts to the Form 1040 series for the 2012 returns that individuals may be currently filing. However, if you received a health insurance premium rebate during 2012, check irs.gov/aca under Medical Loss Ratio to see if you are one of the few people who needs to include it on your 2012 return. If you do not have a tax filing requirement, you do not need to file a 2012 federal tax return to establish future eligibility or qualify for future financial assistance to purchase health care coverage through an exchange. To find out if you have to file a federal tax return for other reasons, use the IRS Interactive Tax Assistant.
If you are seeking information about how to obtain health care coverage or financial assistance to purchase health care coverage for you and your family, visit the Health and Human Services website,HealthCare.gov.
The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that are in effect and more that will be implemented during the next several years. The following is a list of provisions for which the IRS has issued proposed and/or final guidance:
Reporting Employer Provided Health Coverage in Form W-2 The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.
The amount reported does not affect tax liability, as the value of the employer excludible contribution to health coverage continues to be excludible from an employee's income, and it is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers.
More information about the reporting can be found on Form W-2 Reporting of Employer-Sponsored Health Coverage.
Net Investment Income Tax A new Net Investment Income Tax goes into effect starting in 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. The IRS and the Treasury Department have issued proposed regulationson the Net Investment Income Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Net Investment Income Tax, see our questions and answers.
Additional Medicare Tax A new Additional Medicare Tax goes into effect starting in 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. The IRS and the Treasury Department have issued proposed regulations on the Additional Medicare Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Additional Medicare Tax, see our questions and answers.
Minimum Value On April 26, 2012, the Department of the Treasury and IRS issued Notice 2012-31, which provides information and requested public comment on an approach to determining whether an eligible employer-sponsored health plan provides minimum value. Starting in 2014, whether such a plan provides minimum value will be relevant to eligibility for the premium tax credit and application of the employer shared responsibility payment.
Information Reporting on Health Insurance Coverage On April 26, 2012, the Department of the Treasury and IRS issued Notices 2012-32 and 2012-33, which invited comments to help inform the development of guidance on annual information reporting related to health insurance coverage. The information reporting is to be provided by health insurance issuers, certain employers that sponsor self-insured plans, government agencies and certain other parties that provide health insurance coverage.
Small Business Health Care Tax Credit This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers and our news release.
Health Flexible Spending Arrangements Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements (FSAs) or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. This standard applies only to purchases made on or after Jan. 1, 2011. A similar rule went into effect on Jan. 1, 2011, for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions. For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers. FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met. For more information, see news release IR-2010-128 and Notice 2011-5.
In addition, starting in 2013, there are new rules about the amount that can be contributed to an FSA. Notice 2012-40 provides information about these rules and flexibility for employers applying the new rules and requests comments about other possible administrative changes to the rules on FSA contributions. The notice provides instructions on how to submit comments.
Health Insurance Premium Tax Credit Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. Exchanges will operate in every state and the District of Columbia. The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. On May 18, 2012, the Treasury Department and the IRS issued final regulations which provide guidance for individuals who enroll in qualified health plans through Exchanges and claim the premium tax credit, and for Exchanges that make qualified health plans available to individuals and employers. Additionally, on Jan. 30, 2013, the Treasury Department and IRS released final regulations on the premium tax credit affordability test for related individuals.
The portion of the law that will allow eligible individuals to use tax credits to purchase health coverage through an Exchange is not effective until 2014.
Exchanges will offer individuals a choice of health plans that meet certain benefit and cost standards. The Department of Health and Human Services (HHS) administers the requirements for the Exchanges and the health plans they offer. Additional information about the Exchange can be found at www.healthcare.gov and in IRS REG-131491-10 issued on Aug. 12, 2011.
Individual Shared Responsibility Provision Starting in 2014, the Individual Shared Responsibility provision calls for each individual to either have minimum essential health coverage (minimum essential coverage) for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return. On Jan. 30, 2013, the Treasury Department and the IRS issued proposed regulations on the Individual Shared Responsibility provision. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Individual Shared Responsibility provision and the proposed regulations, see our questions and answers. Additional information on exemptions and minimum essential coverage is available in proposed regulations issued by the U.S. Department of Health & Human Services.
Health Coverage for Older Children Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.
Adoption Credit For tax years 2010 and 2011, the Affordable Care Act raised the maximum adoption credit per child and the credit was refundable. For more information related to the adoption credit for tax years 2010 and 2011, see our news release, tax tip, questions and answers, flyer, Notice 2010-66, Revenue Procedure 2010-31, Revenue Procedure 2010-35 and Revenue Procedure 2011-52.
For tax year 2012, the credit has reverted to being nonrefundable, with a maximum amount (dollar limitation) of $12,650 per child. If you adopted a child in 2012, see Tax Topic 607 for more information. Taxpayers who will be claiming the adoption credit and filing Form 8839, Qualified Adoption Expenses, with their 2012 Form 1040 will be able to file the first week of March 2013. See news release IR-2013-18 for more information.
Medicare Part D Coverage Gap “donut hole” Rebate The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS. More information can be found at www.medicare.gov.
Employer Shared Responsibility Payment Starting in 2014, certain employers must offer health coverage to their full-time employees or a shared responsibility payment may apply. On Dec. 28, 2012, the Treasury Department and the IRS issued proposed regulations on the Employer Shared Responsibility provisions. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Employer Shared Responsibility provisions and the proposed regulations, see our questions and answers. Other information, much of which has been incorporated into the proposed regulations, may be found in news releases IR-2011-92 and IR-2011-50 and Notices 2011-73, 2011-36, 2012-17and 2012-58. Additionally, Notice 2012-59 provides related guidance for group health plans on the waiting periods they may apply before starting coverage.
For More Information For tips, fact sheets, questions and answers, videos and more, see the IRS Affordable Care Act of 2010: News Releases, Multimedia and Legal Guidance page.
Update:
The Health Care Law generally has no new impacts to the Form 1040 series for the 2012 returns that individuals may be currently filing. However, if you received a health insurance premium rebate during 2012, check irs.gov/aca under Medical Loss Ratio to see if you are one of the few people who needs to include it on your 2012 return. If you do not have a tax filing requirement, you do not need to file a 2012 federal tax return to establish future eligibility or qualify for future financial assistance to purchase health care coverage through an exchange. To find out if you have to file a federal tax return for other reasons, use the IRS Interactive Tax Assistant.
If you are seeking information about how to obtain health care coverage or financial assistance to purchase health care coverage for you and your family, visit the Health and Human Services website,HealthCare.gov.
The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that are in effect and more that will be implemented during the next several years. The following is a list of provisions for which the IRS has issued proposed and/or final guidance:
Reporting Employer Provided Health Coverage in Form W-2 The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.
The amount reported does not affect tax liability, as the value of the employer excludible contribution to health coverage continues to be excludible from an employee's income, and it is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers.
More information about the reporting can be found on Form W-2 Reporting of Employer-Sponsored Health Coverage.
Net Investment Income Tax A new Net Investment Income Tax goes into effect starting in 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. The IRS and the Treasury Department have issued proposed regulationson the Net Investment Income Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Net Investment Income Tax, see our questions and answers.
Additional Medicare Tax A new Additional Medicare Tax goes into effect starting in 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. The IRS and the Treasury Department have issued proposed regulations on the Additional Medicare Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Additional Medicare Tax, see our questions and answers.
Minimum Value On April 26, 2012, the Department of the Treasury and IRS issued Notice 2012-31, which provides information and requested public comment on an approach to determining whether an eligible employer-sponsored health plan provides minimum value. Starting in 2014, whether such a plan provides minimum value will be relevant to eligibility for the premium tax credit and application of the employer shared responsibility payment.
Information Reporting on Health Insurance Coverage On April 26, 2012, the Department of the Treasury and IRS issued Notices 2012-32 and 2012-33, which invited comments to help inform the development of guidance on annual information reporting related to health insurance coverage. The information reporting is to be provided by health insurance issuers, certain employers that sponsor self-insured plans, government agencies and certain other parties that provide health insurance coverage.
Small Business Health Care Tax Credit This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers and our news release.
Health Flexible Spending Arrangements Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements (FSAs) or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. This standard applies only to purchases made on or after Jan. 1, 2011. A similar rule went into effect on Jan. 1, 2011, for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions. For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers. FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met. For more information, see news release IR-2010-128 and Notice 2011-5.
In addition, starting in 2013, there are new rules about the amount that can be contributed to an FSA. Notice 2012-40 provides information about these rules and flexibility for employers applying the new rules and requests comments about other possible administrative changes to the rules on FSA contributions. The notice provides instructions on how to submit comments.
Health Insurance Premium Tax Credit Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. Exchanges will operate in every state and the District of Columbia. The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. On May 18, 2012, the Treasury Department and the IRS issued final regulations which provide guidance for individuals who enroll in qualified health plans through Exchanges and claim the premium tax credit, and for Exchanges that make qualified health plans available to individuals and employers. Additionally, on Jan. 30, 2013, the Treasury Department and IRS released final regulations on the premium tax credit affordability test for related individuals.
The portion of the law that will allow eligible individuals to use tax credits to purchase health coverage through an Exchange is not effective until 2014.
Exchanges will offer individuals a choice of health plans that meet certain benefit and cost standards. The Department of Health and Human Services (HHS) administers the requirements for the Exchanges and the health plans they offer. Additional information about the Exchange can be found at www.healthcare.gov and in IRS REG-131491-10 issued on Aug. 12, 2011.
Individual Shared Responsibility Provision Starting in 2014, the Individual Shared Responsibility provision calls for each individual to either have minimum essential health coverage (minimum essential coverage) for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return. On Jan. 30, 2013, the Treasury Department and the IRS issued proposed regulations on the Individual Shared Responsibility provision. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Individual Shared Responsibility provision and the proposed regulations, see our questions and answers. Additional information on exemptions and minimum essential coverage is available in proposed regulations issued by the U.S. Department of Health & Human Services.
Health Coverage for Older Children Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.
Adoption Credit For tax years 2010 and 2011, the Affordable Care Act raised the maximum adoption credit per child and the credit was refundable. For more information related to the adoption credit for tax years 2010 and 2011, see our news release, tax tip, questions and answers, flyer, Notice 2010-66, Revenue Procedure 2010-31, Revenue Procedure 2010-35 and Revenue Procedure 2011-52.
For tax year 2012, the credit has reverted to being nonrefundable, with a maximum amount (dollar limitation) of $12,650 per child. If you adopted a child in 2012, see Tax Topic 607 for more information. Taxpayers who will be claiming the adoption credit and filing Form 8839, Qualified Adoption Expenses, with their 2012 Form 1040 will be able to file the first week of March 2013. See news release IR-2013-18 for more information.
Medicare Part D Coverage Gap “donut hole” Rebate The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS. More information can be found at www.medicare.gov.
Employer Shared Responsibility Payment Starting in 2014, certain employers must offer health coverage to their full-time employees or a shared responsibility payment may apply. On Dec. 28, 2012, the Treasury Department and the IRS issued proposed regulations on the Employer Shared Responsibility provisions. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Employer Shared Responsibility provisions and the proposed regulations, see our questions and answers. Other information, much of which has been incorporated into the proposed regulations, may be found in news releases IR-2011-92 and IR-2011-50 and Notices 2011-73, 2011-36, 2012-17and 2012-58. Additionally, Notice 2012-59 provides related guidance for group health plans on the waiting periods they may apply before starting coverage.
For More Information For tips, fact sheets, questions and answers, videos and more, see the IRS Affordable Care Act of 2010: News Releases, Multimedia and Legal Guidance page.
Maryland Income Tax Credits for Businesses
ENTERPRISE ZONE TAX CREDIT
Businesses located in an enterprise zone may be eligible for tax credits based upon wages paid to qualifying employees.
EMPLOYMENT OPPORTUNITY TAX CREDIT
Businesses that employ persons receiving Aid to Families With Dependent Children or Family Investment Program entitlements may be eligible for tax credits based upon wages paid to qualified employees and the child care expenses and transportation expenses paid on behalf of the qualified employees.
MARYLAND DISABILITY EMPLOYMENT TAX CREDIT
Businesses that employ persons with disabilities may be eligible for tax credits based upon wages paid to the qualified employees and the child care expenses and transportation expenses paid on behalf of the qualified employees.
MARYLAND RESEARCH AND DEVELOPMENT TAX CREDIT
Businesses may claim a credit for certain qualified research and development expenses.
LONG-TERM EMPLOYMENT OF QUALIFIED EX-FELONS
Businesses that employ ex-felons under a program certified by the Department of Labor, Licensing and Regulation may be eligible for a credit based upon wages paid to the qualified employee.
JOB CREATION TAX CREDIT
Certain businesses that create new qualified positions in Maryland may be eligible for tax credits based on the number of qualified positions created or wages paid for these positions.
BUSINESSES THAT CREATE NEW JOBS TAX CREDIT
Certain businesses located in Maryland that create new positions or establish or expand business facilities in the state may be entitled to an income tax credit if a property tax credit is granted by Baltimore City or any county or municipal corporation of Maryland.
WORK-BASED LEARNING PROGRAM TAX CREDIT
Businesses located in Maryland that provide approved work-based learning programs for secondary or post secondary student employees may be eligible for tax credits based on the number of qualified participating student employees or wages paid for these employees.
EMPLOYER-PROVIDED LONG-TERM CARE INSURANCE TAX CREDIT
A credit may be claimed for costs incurred by an employer that provides long-term care insurance as part of an employee benefit package.
ONE MARYLAND ECONOMIC DEVELOPMENT TAX CREDIT
Businesses may claim credits for project and start-up costs to establish, relocate or expand a business in a distressed county in Maryland. A portion of this credit may be refundable.
COMMUTER TAX CREDIT
Businesses may claim a credit for the cost of providing qualifying commuter benefits to the business entities’ employees.
GREEN BUILDING TAX CREDIT
A business that constructs or rehabilitates a building that conforms to specific standards intended to save energy and to mitigate environmental impact may take a credit for a portion of the cost.
ELECTRIC VEHICLE RECHARGING EQUIPMENT TAX CREDIT
An individual or a corporation may be certified to claim a credit for a certain amount of cost for electric vehicle recharging equipment that is placed into service during the tax year in which the credit is claimed.
JOB CREATION AND RECOVERY TAX CREDIT
Businesses that operate or conduct business in Maryland that hire certain workers for newly created or certain vacant positions in the State may be entitled to a tax credit.
ONE MARYLAND ECONOMIC DEVELOPMENT TAX CREDIT
Businesses may claim credits for project and start-up costs to establish, relocate or expand a business in a distressed county in Maryland. A portion of this credit may be refundable.
Businesses located in an enterprise zone may be eligible for tax credits based upon wages paid to qualifying employees.
EMPLOYMENT OPPORTUNITY TAX CREDIT
Businesses that employ persons receiving Aid to Families With Dependent Children or Family Investment Program entitlements may be eligible for tax credits based upon wages paid to qualified employees and the child care expenses and transportation expenses paid on behalf of the qualified employees.
MARYLAND DISABILITY EMPLOYMENT TAX CREDIT
Businesses that employ persons with disabilities may be eligible for tax credits based upon wages paid to the qualified employees and the child care expenses and transportation expenses paid on behalf of the qualified employees.
MARYLAND RESEARCH AND DEVELOPMENT TAX CREDIT
Businesses may claim a credit for certain qualified research and development expenses.
LONG-TERM EMPLOYMENT OF QUALIFIED EX-FELONS
Businesses that employ ex-felons under a program certified by the Department of Labor, Licensing and Regulation may be eligible for a credit based upon wages paid to the qualified employee.
JOB CREATION TAX CREDIT
Certain businesses that create new qualified positions in Maryland may be eligible for tax credits based on the number of qualified positions created or wages paid for these positions.
BUSINESSES THAT CREATE NEW JOBS TAX CREDIT
Certain businesses located in Maryland that create new positions or establish or expand business facilities in the state may be entitled to an income tax credit if a property tax credit is granted by Baltimore City or any county or municipal corporation of Maryland.
WORK-BASED LEARNING PROGRAM TAX CREDIT
Businesses located in Maryland that provide approved work-based learning programs for secondary or post secondary student employees may be eligible for tax credits based on the number of qualified participating student employees or wages paid for these employees.
EMPLOYER-PROVIDED LONG-TERM CARE INSURANCE TAX CREDIT
A credit may be claimed for costs incurred by an employer that provides long-term care insurance as part of an employee benefit package.
ONE MARYLAND ECONOMIC DEVELOPMENT TAX CREDIT
Businesses may claim credits for project and start-up costs to establish, relocate or expand a business in a distressed county in Maryland. A portion of this credit may be refundable.
COMMUTER TAX CREDIT
Businesses may claim a credit for the cost of providing qualifying commuter benefits to the business entities’ employees.
GREEN BUILDING TAX CREDIT
A business that constructs or rehabilitates a building that conforms to specific standards intended to save energy and to mitigate environmental impact may take a credit for a portion of the cost.
ELECTRIC VEHICLE RECHARGING EQUIPMENT TAX CREDIT
An individual or a corporation may be certified to claim a credit for a certain amount of cost for electric vehicle recharging equipment that is placed into service during the tax year in which the credit is claimed.
JOB CREATION AND RECOVERY TAX CREDIT
Businesses that operate or conduct business in Maryland that hire certain workers for newly created or certain vacant positions in the State may be entitled to a tax credit.
ONE MARYLAND ECONOMIC DEVELOPMENT TAX CREDIT
Businesses may claim credits for project and start-up costs to establish, relocate or expand a business in a distressed county in Maryland. A portion of this credit may be refundable.
Employers Hiring Veterans by Year’s End May Get Expanded Tax Credit
Employers planning to claim an expanded tax credit for hiring certain veterans should act soon, according to the IRS. Many businesses may qualify to receive thousands of dollars through the Work Opportunity Tax Credit, but only if the veteran begins work before the new year.
Here are six key facts about the WOTC as expanded by VOW to Hire Heroes Act of 2011.
1. Hiring Deadline: Employers may be able to claim the expanded WOTC for qualified veterans who begin work on or after Nov. 22, 2011 but before Jan. 1, 2013.
2. Maximum Credit: The maximum tax credit is $9,600 per worker for employers that operate for-profit businesses, or $6,240 per worker for tax-exempt organizations.
3. Credit Factors: The amount of credit will depend on a number of factors. Such factors include the length of the veteran’s unemployment before being hired, the number of hours the veteran works and the amount of the wages the veteran receives during the first-year of employment.
4. Disabled Veterans: Employers hiring veterans with service-related disabilities may be eligible for the maximum tax credit.
5. State Certification: Employers must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their state workforce agency. The form must be filed within 28 days after the qualified veteran starts work. For additional information about your SWA visit the U.S. Department of Labor’s WOTC website.
6. E-file: Some states accept Form 8850 electronically.
Visit the IRS.gov website and enter ‘WOTC’ in the search field for forms and more details about the expanded tax credit for hiring veterans.
Here are six key facts about the WOTC as expanded by VOW to Hire Heroes Act of 2011.
1. Hiring Deadline: Employers may be able to claim the expanded WOTC for qualified veterans who begin work on or after Nov. 22, 2011 but before Jan. 1, 2013.
2. Maximum Credit: The maximum tax credit is $9,600 per worker for employers that operate for-profit businesses, or $6,240 per worker for tax-exempt organizations.
3. Credit Factors: The amount of credit will depend on a number of factors. Such factors include the length of the veteran’s unemployment before being hired, the number of hours the veteran works and the amount of the wages the veteran receives during the first-year of employment.
4. Disabled Veterans: Employers hiring veterans with service-related disabilities may be eligible for the maximum tax credit.
5. State Certification: Employers must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their state workforce agency. The form must be filed within 28 days after the qualified veteran starts work. For additional information about your SWA visit the U.S. Department of Labor’s WOTC website.
6. E-file: Some states accept Form 8850 electronically.
Visit the IRS.gov website and enter ‘WOTC’ in the search field for forms and more details about the expanded tax credit for hiring veterans.
What Employers Need to Know About Claiming the Small Business Health Care Tax Credit
If you are a small employer with fewer than 25 full-time equivalent employees that earn an average wage of less than $50,000 a year and you pay at least half of employee health insurance premiums…then there is a tax credit that may put money in your pocket.
The Small Business Health Care Tax Credit is specifically targeted to help small businesses and tax-exempt organizations. The credit can enable small businesses and small tax-exempt organizations to offer health insurance coverage for the first time. It also helps those already offering health insurance coverage to maintain the coverage they already have.
Here is what small employers need to know so they don’t miss out on the credit for tax year 2011:
Additional information about eligibility requirements and calculating the credit can be found on the Small Business Health Care Tax Credit for Small Employers page of IRS.gov.
The Small Business Health Care Tax Credit is specifically targeted to help small businesses and tax-exempt organizations. The credit can enable small businesses and small tax-exempt organizations to offer health insurance coverage for the first time. It also helps those already offering health insurance coverage to maintain the coverage they already have.
Here is what small employers need to know so they don’t miss out on the credit for tax year 2011:
- Qualifying businesses calculate the small business health care credit on Form 8941, Credit for Small Employer Health Insurance Premiums, and claim it as part of the general business credit on Form 3800, General Business Credit, which they would include with their tax return.
- Tax-exempt organizations can use Form 8941 to calculate the credit and then claim the credit on Form 990-T, Exempt Organization Business Income Tax Return, Line 44f.
- Businesses that couldn’t use the credit in 2011 may be eligible to claim it in future years. Eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014.
Additional information about eligibility requirements and calculating the credit can be found on the Small Business Health Care Tax Credit for Small Employers page of IRS.gov.
IRS Releases Guidance on How to Claim Expanded Veterans Tax Credit; Certification Requirements Streamlined
WASHINGTON — The IRS today released the guidance and forms that employers can use to claim the newly-expanded tax credit for hiring veterans. The IRS also announced that employers will have more time to file the required certification form for employees hired on or after November 22, 2011, and before May 22, 2012. The VOW to Hire Heroes Act of 2011, enacted Nov. 21, 2011, provides an expanded Work Opportunity Tax Credit (WOTC) to businesses that hire eligible unemployed veterans and for the first time also makes the credit available to certain tax-exempt organizations.
The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 for tax-exempt organizations. The amount of the credit depends on a number of factors, including the length of the veteran’s unemployment before hire, hours a veteran works and the amount of first-year wages paid. Employers who hire veterans with service-related disabilities may be eligible for the maximum credit.
Normally, an eligible employer must file Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. But according to today’s guidance, employers have until June 19, 2012, to complete and file this newly-revised form for veterans hired on or after Nov. 22, 2011, and before May 22, 2012. The 28-day rule will again apply to eligible veterans hired on or after May 22, 2012.
In an effort to streamline the certification requirements, IRS today clarified and expanded upon 2002 guidance to facilitate employers’ use of electronic signatures when gathering the Form 8850 for transmission to state workforce agencies. The guidance confirms that employers can transmit the Form 8850 electronically, and also allows employers to transmit the Form 8850 via fax, subject to the ability of the state workforce agencies to accept submissions in those formats. The IRS expects the Department of Labor to issue further guidance to the state workforce agencies providing further clarification.
Notice 2012-13, posted today on IRS.gov, and the instructions for Form 8850 provide further details.
Businesses claim the credit on their income tax return. The credit is first figured on Form 5884 and then becomes a part of the general business credit claimed on Form 3800.
This credit is also available to certain tax-exempt organizations by filing Form 5884-C. The guidance released today also provides instructions and a new set of forms for tax-exempt organizations to claim the credit. For more information, including how to claim the credit, go to IRS.gov.
The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 for tax-exempt organizations. The amount of the credit depends on a number of factors, including the length of the veteran’s unemployment before hire, hours a veteran works and the amount of first-year wages paid. Employers who hire veterans with service-related disabilities may be eligible for the maximum credit.
Normally, an eligible employer must file Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. But according to today’s guidance, employers have until June 19, 2012, to complete and file this newly-revised form for veterans hired on or after Nov. 22, 2011, and before May 22, 2012. The 28-day rule will again apply to eligible veterans hired on or after May 22, 2012.
In an effort to streamline the certification requirements, IRS today clarified and expanded upon 2002 guidance to facilitate employers’ use of electronic signatures when gathering the Form 8850 for transmission to state workforce agencies. The guidance confirms that employers can transmit the Form 8850 electronically, and also allows employers to transmit the Form 8850 via fax, subject to the ability of the state workforce agencies to accept submissions in those formats. The IRS expects the Department of Labor to issue further guidance to the state workforce agencies providing further clarification.
Notice 2012-13, posted today on IRS.gov, and the instructions for Form 8850 provide further details.
Businesses claim the credit on their income tax return. The credit is first figured on Form 5884 and then becomes a part of the general business credit claimed on Form 3800.
This credit is also available to certain tax-exempt organizations by filing Form 5884-C. The guidance released today also provides instructions and a new set of forms for tax-exempt organizations to claim the credit. For more information, including how to claim the credit, go to IRS.gov.
Depreciation
You generally cannot deduct, in one year, the entire cost of property you purchased, either for use in your trade or business or to produce income, if the property has a useful life substantially beyond the tax year. Instead, you can depreciate it. That is, you can spread the cost over a number of years, and deduct a part of the cost each year. Instead of recovering the cost of the property by taking depreciation deductions, you can elect under Code section 179 to recover all or part of the cost of qualifying property, up to a limit, by deducting it in the year you place the qualifying property in service. For more information, refer to Publication 946, How to Depreciate Property.
The kinds of property that you can depreciate include machinery, equipment, buildings, vehicles, and furniture. You cannot claim depreciation on property held for personal purposes. If you use property, such as a car, for both business or investment and personal purposes, only the business or investment use portion may be depreciated. You may depreciate property that meets all five of the following tests.
For more information, refer to Publication 946, How to Depreciate Property, or Publication 534 (PDF), Depreciating Property Placed in Service Before 1987. You can also find information on depreciation in Publication 527, Residential Rental Property (Including Rental of Vacation Homes), Publication 463, Travel, Entertainment, Gift, and Car Expenses, Publication 587, Business Use of Your Home, and Publication 225, Farmer's Tax Guide.
The kinds of property that you can depreciate include machinery, equipment, buildings, vehicles, and furniture. You cannot claim depreciation on property held for personal purposes. If you use property, such as a car, for both business or investment and personal purposes, only the business or investment use portion may be depreciated. You may depreciate property that meets all five of the following tests.
- It must be property you own.
- It must be used in a business or other income–producing activity.
- It must have a determinable useful life.
- It must be expected to last more than one year.
- It must not be excepted property. Excepted property (as described in Publication 946, How to Depreciate Property) includes certain intangible property, certain term interests, and property placed in service and disposed of in the same year.
For more information, refer to Publication 946, How to Depreciate Property, or Publication 534 (PDF), Depreciating Property Placed in Service Before 1987. You can also find information on depreciation in Publication 527, Residential Rental Property (Including Rental of Vacation Homes), Publication 463, Travel, Entertainment, Gift, and Car Expenses, Publication 587, Business Use of Your Home, and Publication 225, Farmer's Tax Guide.
IRS Releases Information to Help Employers Claim COBRA Medical Coverage Credit on Payroll Tax Form
WASHINGTON — The Internal Revenue Service today released new detailed information that will help employers claim credit for the COBRA medical premiums they pay for their former employees.
The IRS unveiled new information on this Web site, IRS.gov, that includes an extensive set of questions and answers for employers. In addition, the Web site contains a revised version of the quarterly payroll tax return that employers will use to claim credit for the COBRA medical premiums they pay for their former employees.
Form 941, Employer’s Quarterly Federal Tax Return, will also be sent to about 2 million employers in mid-March. The form is used to claim the new COBRA premium assistance payments credit, beginning with the first quarter of 2009.
“This is the first step in our effort to provide employers with information on this important health benefit for people who have lost their jobs,” said IRS Commissioner Doug Shulman. “We will continue our work in the weeks ahead to help employers implement this crucial change for the nation’s unemployed.”
The American Recovery and Reinvestment Act of 2009, which became law last week, includes changes to the health benefit provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly referred to as COBRA. The new law will affect former employees and their families, employers and others involved in providing COBRA coverage.
Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.
Employers must maintain supporting documentation for the credit claimed. This includes:
* Documentation of receipt of the employee’s 35 percent share of the premium.
* In the case of insured plans: A copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier.
* Declaration of the former employee’s involuntary termination.
COBRA provides certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. COBRA generally covers health plans maintained by private-sector employers with 20 or more full and part-time employees. It also covers employee organizations or federal, state or local governments. It does not apply to churches and certain religious organizations. The new COBRA subsidy provisions also apply to insurers required to offer continuation coverage under state law similar to the federal COBRA.
More information about COBRA payments and the new law is available on www.dol.gov.
The IRS unveiled new information on this Web site, IRS.gov, that includes an extensive set of questions and answers for employers. In addition, the Web site contains a revised version of the quarterly payroll tax return that employers will use to claim credit for the COBRA medical premiums they pay for their former employees.
Form 941, Employer’s Quarterly Federal Tax Return, will also be sent to about 2 million employers in mid-March. The form is used to claim the new COBRA premium assistance payments credit, beginning with the first quarter of 2009.
“This is the first step in our effort to provide employers with information on this important health benefit for people who have lost their jobs,” said IRS Commissioner Doug Shulman. “We will continue our work in the weeks ahead to help employers implement this crucial change for the nation’s unemployed.”
The American Recovery and Reinvestment Act of 2009, which became law last week, includes changes to the health benefit provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly referred to as COBRA. The new law will affect former employees and their families, employers and others involved in providing COBRA coverage.
Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.
Employers must maintain supporting documentation for the credit claimed. This includes:
* Documentation of receipt of the employee’s 35 percent share of the premium.
* In the case of insured plans: A copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier.
* Declaration of the former employee’s involuntary termination.
COBRA provides certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. COBRA generally covers health plans maintained by private-sector employers with 20 or more full and part-time employees. It also covers employee organizations or federal, state or local governments. It does not apply to churches and certain religious organizations. The new COBRA subsidy provisions also apply to insurers required to offer continuation coverage under state law similar to the federal COBRA.
More information about COBRA payments and the new law is available on www.dol.gov.