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Health Tax Credit for Small Employers
Equine Accounting
Wednesday 23rd of March 2011 11:38 AM

Health Tax Credit for Small Employers

 

The massive healthcare legislation includes a tax credit for small employers, including equine businesses, who pay at least 50% of their employees’ health insurance premiums. Unlike most of the future healthcare bill provisions, this employer federal tax credit can be claimed for year 2010 tax returns due this spring. This new tax credit is reported on IRS Form 8941 – a one page tax form which requires completion of 7 different worksheets to accurately calculate the tax credit. You can review IRS Form 8941 with instructions at www.irs.gov.

 

“Small employers” who qualify for this 2010 income tax credit (including churches and section 501(C) (3) charitable organizations) must satisfy ALL of the following conditions:

 

  1. You paid at least 50% of the “single employee” premium cost for year 2010. Insurance costs are for primary health insurance and dental and vision insurance. Employer contributions to HSAs, HRAs and FSA medical accounts are not deemed insurance and thus are not eligible for the tax credit; AND
  2. You employed fewer than 25 “full-time equivalent” (FTE) employees during 2010; AND
  3. Your “average annual wages” paid to employees during 2010 were less than $50,000 per FTE employee, for this purpose “wages” are gross wages paid before any tax or retirement withholdings.

 

If you meet all three of these requirements, you may qualify for the tax credit. Form 8941 can be very confusing with all the calculations, so please contact your accounting firm or CPA for further information on how you can take advantage of this 2010 credit.


How Independent Are They?
Equine Accounting
Wednesday 9th of March 2011 10:30 AM

When starting your own equine business, it’s not unusual to be a workforce of one without any employees. The profits haven’t started rolling in yet, and you simply don’t have the income to justify hiring anyone. So, you do what you think is a smart thing to do. You "hire" independent contractors and tell the contractors to be responsible for their own taxes. 

Sounds like a good plan, right? But watch out for misclassification of employees and workers. The Internal Revenue Service is cracking down on the "independent contractor vs. employee" question. As a result, small and large businesses alike are on their toes. Harsh penalties can result from incorrectly paying an employee as "casual labor."

 For the IRS, telling the difference between a contractor and employee is a matter of determining just how independent the individual is from the company he's working for. An independent contractor negotiates their rate of pay, can set their own schedule, can refuse projects, provides an invoice on their letterhead for services performed, often works for other people, uses their own supplies and usually works on a project by project basis rather than for an indefinite period.

 An employee is under the employer’s direct control, whether they are full or part-time. Employer offers them a rate of compensation, they work a schedule determined by the employer, and the employer provides work space and supplies. An employee typically is provided benefits such as vacation, health insurance and retirement plan options.

 The IRS cannot simply declare that any worker with a specific characteristic is an employee or an independent contractor. Instead, the classification of employees and contractors is a matter that must be considered carefully, often on a case-by-case basis. Now is a good time to evaluate your working relationships to make sure you are in compliance with the IRS.

 


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