Vision Payroll

In Rev. Rul. 2010-13, Average Premium for Small Group Market for Determining the Small Employer Health Insurance Credit, the Internal Revenue Service (IRS) and the Department of Health and Human Services (HHS) released the chart containing the small group market in each state for the 2010 taxable year. Under the health care reform, employers are allowed a credit in certain situations if they pay a portion of their employees’ health insurance premiums. The credit is limited to the lesser of:

1. The amount of nonelective contributions paid by the eligible small employer on behalf of employees under the arrangement during the taxable year, and
2. The amount of nonelective contributions the employer would have paid under the arrangement if each such employee were enrolled in a plan that had a premium equal to the average premium for the small group market in the state (or in an area in the state) in which the employer is offering health insurance coverage.

The State of Idaho had the lowest rates at $4,215 for employee-only coverage and $9,365 for family coverage while the Commonwealth of Massachusetts had the highest rates at $5,700 and $14,138, respectively. Family coverage includes any coverage other than employee-only (or single) coverage.

According to Rev. Rul. 2010-13:

HHS recognizes that there may be areas in some States with meaningfully higher premium rates. For the 2010 taxable year, HHS may provide additional average premium rates for the small group market in certain areas within States. However, in no case will any such additional sub-State rates be lower than the applicable rate for each State that is set forth in this Revenue Ruling.

Contact Vision Payroll for further information on the average premium for the small group markets during 2010.

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 Employers in a Controlled Group or an Affiliated Service Group.

The aggregation rules of §414(b), (c), (m), and (o) apply so that controlled groups of corporation, businesses under common control, and affiliated service groups will be treated as a single employer for this purpose. Therefore, all employees of the controlled group or affiliated service group, and all wages paid to employees by the controlled group or affiliated service group, are counted in determining whether any member of the controlled group or affiliated service group is a qualified employer.

The next topic to be covered in this series is Claiming the Small Business Health Care Tax Credit. Contact Vision Payroll if you have further questions on Employers in a Controlled Group or an Affiliated Service Group.

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 the Impact of Seasonal Employees.

Seasonal employees who do not work for the employer more than 120 days during the taxable year are excluded in the calculation of full-time equivalent employees. Seasonal employees in this sense are seasonal employees as defined by the Secretary of Labor and retail workers employed exclusively during holiday seasons. Any time worked on a calendar day is counted as a day of work.

The next topic to be covered in this series is the Impact of Owners and Relatives. Contact Vision Payroll if you have further questions on the Impact of Seasonal Employees.

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 the Twenty-five or More Employees.

Employers with twenty-five or more employees may still qualify for the credit because the credit is based on the number of full-time equivalents (FTEs), not the actual number of employees. An employer with forty-six employees who work 1,040 hours each would only have twenty-three FTEs and could still qualify for the credit.

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

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.

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 Timing of Payments to be Counted in Calculating the Small Business Health Care Tax Credit.

The premiums to be counted are all qualifying premiums paid during the employer’s tax year beginning in 2010. Premiums paid before the passage of the Patient Protection and Affordable Care Act, but during the employer’s tax year beginning in 2010, do qualify for the credit as long as they otherwise qualify for the credit.

The next topic to be covered in this series is Determining the Number of Full-Time Equivalents. Contact Vision Payroll if you have further questions on the Timing of Payments to be Counted in Calculating the Small Business Health Care Tax Credit.

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 More than Ten Full-time Equivalent Employees and Average Annual Wages Greater than $25,000.

Employers with ten or fewer full-time equivalent employees (FTEs) do not need to reduce their credit due to the number of FTEs and employers with average annual wages of $25,000 or less do not need to reduce their credit due to the average annual wage. For employers more than ten FTEs and with average annual wages greater than $25,000, the reduction is determined by calculating the individual reductions and adding them together to get the total reduction. If an employer has 13 employees with average annual wages of $33,000 and a credit before reduction of $50,000, then the credit reduction would be $24,000. The steps are as follows:

1. Calculate FTE reduction = $10,000
2. Calculate excess wages reduction = $16,000
3. Sum the reductions $10,000 + $16,000 = $26,000

The allowable credit would be $50,000 – $26,000 = $24,000.

The next topic to be covered in this series is the Timing of Payments to be Counted in Calculating the Small Business Health Care Tax Credit. Contact Vision Payroll if you have further questions on the Impact of More than Ten Full-time Equivalent Employees and Average Annual Wages Greater than $25,000.

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 Average Annual Wages Greater than $25,000.

Employers with average annual wages of $25,000 or less do not need to reduce their credit due to the average annual wage. For employers with average annual wages greater than $25,000, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the amount by which the average annual wages exceed $25,000 and the denominator of which is $25,000. If an employer has 10 employees with average annual wages of $33,000 and a credit before reduction of $50,000, then the credit reduction would be $16,000. The steps are as follows:

1. Calculate excess average annual wages $33,000 – $25,000 = $8,000.
2. Calculate fraction $8,000 ÷ $25,000 = 32%.
3. Multiply fraction by credit amount before reduction $50,000 X 32% = $16,000.

The allowable credit would be $50,000 – $16,000 = $34,000.

The next topic to be covered in this series is the Impact of More than Ten Full-time Equivalent Employees and Average Annual Wages Greater than $25,000. Contact Vision Payroll if you have further questions on the Impact of Average Annual Wages Greater than $25,000.