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IRS Releases Healthcare Tax Credit Form

John Commins, for HealthLeaders Media, September 8, 2010

The Internal Revenue Service has released a draft form for small businesses and tax-exempt organizations to calculate healthcare tax credits in preparation for filing income tax returns next year.

The tax credit was included in the Affordable Care Act signed by President Obama in March and is effective this year. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

IRS also announced how eligible tax-exempt organizations—which do not generally file income tax returns—will claim the credit during the 2011 filing season. IRS has posted a draft of Form 8941 on IRS.gov. Small businesses will include the credit as part of the general business credit on its income tax return.

Tax-exempt organizations will claim the small business healthcare tax credit on a revised Form 990-T. The Form 990-T is now used by tax-exempt organizations to report and pay the tax on unrelated business income. Form 990-T 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 small business healthcare tax credit, IRS said.

The final version of Form 8941 and its instructions will be available later this year.

In 2010, the credit is available to small employers that contribute an amount equivalent to at least half the cost of single coverage towards buying health insurance for their employees. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers, IRS said.

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