New Tax Credit Official for Small Businesses

A rather good news for small businesses! The Obama Administration has officially enacted a tax credit to help offset the cost of medical benefits for small businesses all over the country. This is all a part of the recent health care reform, and it is hoped that it will encourage more of these small companies to offer insurance to their employees, a move that will soon be mandatory under threat of expensive penalties of $2,000 per uncovered employee per year.

So, what are these tax credits, exactly? Basically, you will be given a federal credit of up to 35% of all costs for providing coverage. This is meant for companies of 25 or less employees, of which the average salary for those employees is less than $50,000 per year. This will cover a large number of businesses in the United States.

The amount paid in the credit will phase out depending on the exact number of employees versus average gross annual salary. That means the full 35% will be applied only to companies of fewer than 10 employees making less than $25,000 per year. But the sliding scale still offers significant cuts for those that apply under the maximum.

You also have three methods available to you to help count full time workers, hours worked, amount paid, benefit costs, and other factors to make your case the most beneficial to your company. This is to help both health care reform – a major undertaking by President Obama and his administration – and to establish better perks for small businesses, who have been tossed to the wayside in exchange for large companies in recent years. This switch to corporations has had a negative effect on our damaged economy.

What Are the Fines for Denying Coverage?

Companies that deny medical coverage to employees under new federal legislation will face fines after 2014 if those workers are not offered benefits. This fine is an approximate $2,000 per employee, which is a hard cost of offset for small businesses. But, likewise, the cost of providing those health benefits are equally as detrimental, which is why these credits are being offered.

What Does This Mean for Me?

This means you will be able to better provide for those working under you. There will be some cost, but that cost will reduce as health reform takes effect and premiums are driven down. You will also be able to apply these credits to vision and dental. These premiums should also be driven down, as the mandatory coverage law takes effect.

You may also be subject to other tax breaks and credits, which are being discussed.

What Does This Mean for My Employees?

That they should be quite a bit happier working for you! One of the most common complaints among workers of both big and small businesses is that they get no medical coverage, or can’t afford what is offered. Often, a company will offer insurance at high rates, but the coverage is so poor that there is no point spending the money if they will have huge deductibles.

With you offering coverage, they will be less likely to quit, happier with their benefits, and healthier as well. This will raise morale and employee loyalty, which can only be good for business.

More announcements are imminent, but keep your eyes on your mailbox. Postcards offering these tax breaks and more information have been sent out. You can also visit the IRS website for more details.