The volume of claims for the Small Business Health Care Tax Credit has been lower than expected, according to a Treasury Inspector General for Tax Administration audit released Nov. 7, 2011.
As of mid-May 2011, only 228,000 taxpayers out of an estimated potential pool of 4.4 million taxpayers have made claims for the credit. Less than 15 percent of the expected $2 billion of credit for tax year 2010 was claimed.
The credit is generally available only to small employers who pay at least half the cost of health insurance coverage for their employees. The credit is refundable to tax-exempt organizations but only to the extent it does not exceed the total amount of income tax and Medicare tax withholding from employees’ wages and the employer share of Medicare tax.
To qualify for the credit, an employer must have fewer than 25 full-time equivalents for the taxable year and have average annual wages for its employees for the year of less than $50,000 per FTE.
Employers with more than 10 but fewer than 25 FTEs or average wages of more than $25,000 but less than $50,000 may qualify for a reduced credit amount.