How to claim the tax credit

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How does an employer claim the tax credit?

The credit is taken on the annual tax return. Simply fill out Form 8941. For tax-exempt organizations, see “How can non-profits take advantage of this resource?

Does taking the tax credit affect an employer’s deduction for health insurance premiums?

Yes. The amount taken for the tax credit must be subtracted from the deduction.

May an employer reduce employment tax payments during the year in anticipation of the tax credit?

No. The credit applies against income tax, not employment tax (i.e. withheld income tax, social security tax, and Medicare tax).

Can an employer (other than a tax-exempt employer) claim the credit if it has no taxable income for the year?

Generally, no. Except in the case of a tax-exempt employer, the credit for a year offsets only an employer’s actual income tax liability (or alternative minimum tax liability) for the year. However, as a general business credit, an unused credit amount can generally be carried back five years and carried forward 20 years. Because an unused credit amount cannot be carried back to a year before the effective date of the credit, though, an unused credit amount for 2010 can only be carried forward.

Can a tax-exempt employer claim the tax credit if it has no taxable income for the year?

Yes. The tax credit is a refundable credit and the employer is eligible for a refund as long as it’s not more than the income tax withholding and Medicare tax liability.

Can the tax credit be counted in determining estimated tax payment for a year?

Yes. The credit may be included in determining estimated tax payments for the year in which the credit applies, following regular estimated tax rules.

Can a small employer claim the credit after they have already filed their taxes?

Yes, after the taxes have been filed a small business owner can file a correction to claim the credit. If you failed to claim the credit on your 2010, 2011 or 2012 taxes but are eligible, you can still get the credit! Simply fill out an amended return, Form 1040x, and attach the Form 8941 to complete the process. For more information, contact your local IRS office.

If a small business files an extension on their federal income taxes, can they still claim the credit?

Yes, a credit can still be claimed on an extension.