The IRS has released the 2011 version of Form 8941, which is used by eligible small employers to calculate their health care tax credit. Once calculated, the tax credit is claimed as a general business credit on Form 3800 (or by tax-exempt small employers as a refundable credit on Form 990-T). As background, employers with fewer than 25 employees and average annual wages of less than $50,000 per employee that offer health insurance coverage under a qualifying arrangement may qualify for a tax credit of up to 35 percent of the non-elective contributions they make toward premium cost. A qualifying arrangement is generally one under which the employer contributes a uniform percentage of at least 50 percent of the premium cost for employees.
Form 8941 has been shortened for 2011 to remove the reporting of carry-forwards, carry-backs, and passive activity limitations for this credit, which are now reported on Form 3800 (General Business Credit). Because the tax credit became effective in 2010 and applied to portions of 2010 that preceded its enactment, there was transition relief in effect to help more employers satisfy the uniformity requirement for 2010. That transition relief is now expired, but IRS guidance has provided clarification on how certain arrangements under which an employee pays less than 50 percent for some employees may nonetheless satisfy the uniformity requirement for years prior to 2014. Those rules vary, depending on how tiers of coverage are structured and whether composite billing or list billing is used. The 2011 Instructions to Form 8941 have been revised, in part, to provide more detail about what constitutes a qualifying arrangement.