Is the new small-business tax credit too complex to calculate and worth too little to claim?
It isn’t often that a business owner will turn down a tax credit, but that’s exactly what’s happening with the Tax Credit for Employee Health Insurance Expenses of Small Employers, a key part of the Affordable Care Act, otherwise known as Obamacare. Many small-business owners have concluded that the credit isn’t worth enough money to justify the effort required to claim it. According to the most recent audit conducted by the Government Accountability Office, an estimated 170,300 small businesses requested the credit with only 29,000 companies qualifying for the entire credit. Considering that as many as 4 million small business qualify, small-business owners have clearly rejected the new Small Business Tax Credit.
How the Tax Credit Works
The purpose of the tax credit is to help small businesses transition to the new system that will be in place once ACA is fully enacted. It provides a dollar-for-dollar discount on your company’s income tax return equivalent to a percentage of what you spend on healthcare premiums.
If your company didn’t earn enough money to take advantage of the credit—for example if you lost money or made very little profits—you can apply the credit to your tax year 2010 or tax year 2011 returns if you did better during one of those years. If not, you also have the option of saving the tax credit amount for future use for up to 20 years. For example, if your credit is for $20,000 but your tax liability without the credit is only $5,000, then you can apply $5,000 this year and carry forward the remaining $15,000 in credit to future years.
