Vision Payroll

The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is the Impact of Owners and Relatives.

Most owners and their relatives and not counted for either the calculation of full-time equivalent employees or average annual wages. The following are excluded from both calculations:

• Sole-proprietors
• Partners
• 2% S corporation shareholders
• 5% owners within the meaning of §416
• Family members or dependents of any one of these first four groups of individuals

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.

The next topic to be covered in this series is Employers in a Controlled Group or an Affiliated Service Group. Contact Vision Payroll if you have further questions on the Impact of Owners and Relatives.

The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is Determining the Amount of Average Annual Wages.

To determine the amount of average annual wages, divide total wages paid to qualifying employees by the number of full-time equivalent employees (FTEs). Round the resulting quotient down to the nearest whole number. For example, if an employer pays $224,000 in wages and has 10 FTEs, compute average annual wages as follows:

• $224,000 ÷ 10 = $22,400
• $22,400 rounded down to the nearest $1,000 = $22,000, so average annual wages are $22,000.

The next topic to be covered in this series is the Impact of the Twenty-five or More Employees. Contact Vision Payroll if you have further questions on Determining the Amount of Average Annual Wages.

The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is Determining the Number of Full-Time Equivalents.

To determine the number of full-time equivalents (FTEs), divide total hours worked by qualifying employees by 2,080, but exclude any hours worked by any single employee in excess of 2,080. Round the resulting quotient down to the nearest whole number. For example, if five employees work 2,080 hours each, three employees work 1,040 hours each, and one employee works 2,300 hours, calculate the number of FTEs as follows:

• 2,080 hours/employee X 5 employees = 10,400 hours
• 1,040 hours/employee X 3 employees = 3,120 hours
• 2,080 hours/employee X 1 employees = 2,080 hours (limited by law to 2,080 maximum per employee)
• 10,400 + 3,120 + 2,080 = 15,600
• 15,600 ÷ 2,080 = 7.5
• 7.5 rounded down to the nearest whole number is 7, so the employer has 7 FTEs.

The next topic to be covered in this series is Determining the Amount of Average Annual Wages. Contact Vision Payroll if you have further questions on Determining the Number of Full-Time Equivalents.