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NC Small Business Owners Optimistic about Health Care Reform Tax Credit

Post on June 1, 2010 by 9 Comments »

The IRS is updating its guidance for small businesses who qualify for the small business tax credit if they provide health insurance. One of the IRS examples illustrates why this is such a big deal:

Example 1: Auto Repair Shop with 10 Employees Gets $24,500 Credit for 2010

Main Street Mechanic:

Employees: 10

Wages: $250,000 total, or $25,000 per worker

Employee Health Care Costs: $70,000

2010 Tax Credit: $24,500 (35% credit)

2014 Tax Credit: $35,000 (50% credit)

Durham small construction company owner Blake Anderson was quoted in a Washington Post story today as being optimistic about the tax credit – looks like he has good reason for that position.

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Comments (Closed):2

  1. Lou Meyers
    June 1, 2010 at 9:16 pm

    Talk to any small business owner and watch their facial expressions when this little string is unraveled:

    PREMIUMS PAID ON BEHALF OF BUSINESS OWNERS AND THEIR FAMILY MEMBERS, WHO ALSO WORK FOR THE BUSINESS ARE NOT COUNTED IN DETERMINING THE AMOUNT OF CREDIT.

    13. If an owner of a business also provides services to it, does the owner count as an employee?

    A. Generally, no. A sole proprietor, a partner in a partnership, a shareholder owning more than two percent of an S corporation, and any owner of more than five percent of other businesses are not considered employees for purposes of the credit. Thus, the wages or hours of these business owners and partners are not counted in determining either the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit.

    14. Do family members of a business owner who work for the business count as employees?

    A. Generally, no. A family member of any of the business owners or partners listed in Q/A-13, or a member of such a business owner’s or partner’s household, is not considered an employee for purposes of the credit. Thus, neither their wages nor their hours are counted in determining the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit. For this purpose, a family member is defined as a child (or descendant of a child); a sibling or step-sibling; a parent (or ancestor of a parent); a step-parent; a niece or nephew; an aunt or uncle; or a son-in-law, daughter- in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law.

    source: http://www.irs.gov/newsroom/article/0,,id=220839,00.html

  2. John Rhodes
    August 1, 2010 at 1:55 pm

    A large number of North Carolinians don’t own businesses, so, unlike small business owners who employ family members, they will not experience the negative aspects of this bill. What optimism is there for those who own family run small businesses?