Updated FAQ on Small Business Health Care Credit

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If you are a small employer with fewer than 25 full-time equivalent employees, pay an average wage of less than $50,000 a year, and pay at least half of your employee health insurance premiums then you may be eligible for the Small Business Health Care Tax Credit.

For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities. An enhanced version of the credit will be effective beginning Jan. 1, 2014. The IRS is expected to issue additional information about the enhanced version as it becomes available. In general, on Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.

Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums – and if you qualify for a 15 percent credit, you save $7,500. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $12,000 a year.

Even if you are a small business employer who does not owe tax for the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

This credit was provided by the Patient Protection and Affordable Care (PPAC) Act as part of a design to reform the United States health care system and encourage employer’s shared responsibility. If you have any questions regarding this credit or any other provision of PPAC Act, please call our office at (310) 691-5040 or (818) 691-1234 or e-mail us at info@85r.4a9.myftpupload.com.

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Accounting 101 for Small Business Startups

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What does your business start-up need to know about accounting?  Well, here’s where to start:

  1. What is your business structure? Choose the best ownership structure for the short term, but do not forget to consider the long term. Maybe an LLC is appropriate for now, and a C-Corporation later.
  2. Where do we form our entity? Do we choose Delaware or Nevada or California? Do we need to register in more than one state?
  3. Are you going to keep your books on a cash-basis, accrual-basis, income-tax-basis, or use some other method? Do your books need to comply with GAAP?
  4. Filing deadlines are different for start-up businesses than for individuals. We all know the April deadline for personal tax returns, but corporate and business returns are due in March and filing late or missing a deadline could trigger interest and penalties.
  5. You will need an EIN (employer identification number) to file your taxes.
  6. Though not accounting per se, startups need insurance. Whatever risks are associated with your business, you need to get the proper business insurance.
  7. Choose your accounting software. We recommend consulting your CPA to determine the best package to fit your needs.
  8. There is no reason to wait to hire your accountant.  Quite the contrary, waiting can lead to missed opportunities and inefficiencies that could have been otherwise avoided. A credentialed accounting professional will be able to assist you in all aspects of your start-up business.
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