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Complexity Keeps Small Businesses From Claiming ObamaCare Tax Credit

The Treasury Inspector General for Tax Administration (TIGTA) released a report yesterday indicating that few eligible taxpayers took advantage of the Small Business Health Care Tax Credit (Credit)—a credit targeted to small business employers who pay at least one-half of the cost of health insurance coverage for their employees—designed to encourage small business employers to offer health care insurance.

Despite the IRS’s efforts to inform eligible taxpayers—issuing official guidance (Notices 2010-44 and 2010-82), holding more than 1,000 outreach and education actions, and mailing approximately 4.4 million postcards with basic information on the Credit to businesses that could be affected—only 5% of eligible taxpaying businesses have claimed the credit (amounting to @14% of the $2 billion in overall credit available in 2010 as estimated by the CBO).

Among other things the TIGTA found that some taxpayers and tax practitioners made mistakes when completing Form 8941 to apply for the credit. That form, Credit for Small Employer Health Insurance Premiums (Form 8941), does not contain all of the data and calculations needed to verify each step of Credit eligibility.

The report also noted that there are multiple steps to calculate the Credit, and that seven worksheets must be completed in association with claiming the Credit.

The IRS plans to hold focus groups to determine why the claim rate was so low . . .

View the Report

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