June 1st, 2012 – One of the more popular sounding aspects of the Health Care Reform Law was a health insurance tax credit for small businesses.
While it sounded good on paper, only 170,300 businesses out of the 4 million eligible businesses filed for the tax credit in 2010. For the 2010 tax year, the average credit claimed was about $2,700.
Many companies didn’t qualify because they were to big or paid fairly decent wages. For those who did qualify, getting the credit proved to be time intensive. Employers have to complete IRS Form 8941 to claim the tax credit and the form has 25 lines and seven worksheets. Some tax preparers said it took clients two to eight hours to gather the supporting information and it took tax professionals an additional three to five hours to calculate the credit.
Part of the problem is that the tax credit is set up so the majority of the tax credits go to very small companies paying very low wages. Roughly 4 in 5 of those types of businesses don’t offer health insurance coverage, and the tax credit isn’t sufficient for them to start doing so.
If the health care reform law withstands the current Supreme Court challenge, more Colorado companies may start claiming the health insurance tax credit. The final Supreme Court decision is expected later this month (June, 2012). Commonly referred to as Health Care Reform or Obamacare, the law being reviewed by the Supreme Court is the Patient Protection and Affordable Care Act (PPACA), which was signed into law by President Obama on March 23rd, 2010.