Information You Need to Use the Estimator
Because of the complexity of the credit, you need to gather some documentation before using the Estimator. You need information on:
- Your insurance plans, and
- Your employees.
- The total amount you pay out of pocket towards your eligible employees' health insurance premiums under a qualifying arrangement,
- Wellness programs. A wellness program is generally an insurance program of health promotion or disease prevention. If you pay part or all of the cost of an employee's participation in a wellness program, use the amount you paid to figure your employer premiums paid.
- Tobacco surcharges. A tobacco surcharge is generally an additional amount charged for insurance for a tobacco user. If you pay part or all of an employee's tobacco surcharge, you cannot use the amount you paid to figure your employer premiums paid.
- Dependent coverage. Dependent coverage is generally coverage offered separately to an individual who is or may become eligible for coverage under the terms of a group health plan because of a relationship to a participant-employee, whether or not a dependent of the participant-employee. Dependent coverage does not include coverage, such as family coverage, which includes coverage of the participant-employee. If you pay part or all of the cost of an employee's dependent coverage, use the amount you paid to figure your employer premiums paid.
- Portion of Premiums Paid. If you pay only a portion of the premiums and your employees pay the rest, only the portion you pay is taken into account. For this purpose, any premium paid through a salary reduction arrangement under a section 125 cafeteria plan is not treated as an employer paid premium. For more information on cafeteria plans, see section 1 of Publication 15-B, Employer's Tax Guide to Fringe Benefits.
- Whether you received subsidies or tax credits from a state for providing insurance to your employees and the amount, and
- State subsidies and credits. If you are entitled to a state tax credit or a state premium subsidy paid directly to you for premiums you paid, do not reduce the amount you paid by the credit or subsidy amount. Also, if a state pays a premium subsidy directly to your insurance provider, treat the subsidy amount as an amount you paid for employee health insurance coverage.
- Whether or not you are an eligible tax-exempt employer and if so, the amount of your payroll taxes for the year.
You need to have the following information on yourself:
If you are an eligible tax-exempt employer, the credit cannot exceed the amount of certain payroll taxes. For this purpose, payroll taxes mean only the following taxes:
- Federal income taxes you were required to withhold from employees' wages during the calendar year,
- Medicare taxes you were required to withhold from employees' wages during the calendar year, and
- Medicare taxes you were required to pay for the calendar year.
Generally, you must pay a uniform percentage (not less than 50%) of the premium cost for each enrolled employee's health insurance coverage. This step will assist you to determine whether you meet this requirement.
You need to have the following information on each plan you offer:
- The plan name,
- The state and county where the plans are offered,
- Average premium limitation. Your credit is reduced if the employer premiums paid are more than the employer premiums that would have been paid if individuals considered employees were enrolled in a plan with a premium equal to the average premium for the small group market in the rating area in which the employee enrolls for coverage.
- The total premium for each tier of coverage,
- Wellness program. If a plan provides a wellness program, for purposes of meeting the uniform percentage requirement any additional amount of your contribution attributable to an employee's participation in the wellness program over your contribution with respect to an employee that does not participate in the wellness program is not taken into account in calculating the uniform percentage requirement.
- Tobacco surcharges. Any additional amount you or your employee pay to cover a tobacco surcharge is not taken into account in figuring the uniform percentage requirement.
- Dependent coverage. Premiums you pay for dependent coverage are not subject to the uniform percentage requirement. You are not required to pay a uniform percentage (not less than 50%) for dependent coverage.
- Stand-alone dental plan. A stand-alone dental plan offered through a SHOP exchange will be considered a qualified health plan for purposes of the credit.
- How much you pay toward the cost of coverage (whether as a percent of the total or a dollar amount) per employee, and
- This is used to determine whether you meet the uniform percentage requirement.
- How many of your employees are enrolled in each tier.
You need to have the following information on your employees:
- Total wages you paid to all your employees,
- The number of employees that worked at least 2,080 hours for you during the year, and
- The time your other employees worked for you (those that worked less than 2,080 hours).
Individuals Considered Employees
In general, all employees who perform services for you during the tax year are taken into account in determining your FTEs, average annual wages, and premiums paid. However, certain employees are not taken into account at all and there are special rules in taking into account others.
The following individuals are not considered employees when you figure this credit. Hours and wages of these employees and premiums paid for them are not counted when you figure your credit.
- The owner of a sole proprietorship.
- A partner in a partnership.
- A shareholder who owns (after applying the section 318 constructive ownership rules) more than 2% of an S corporation.
- A shareholder who owns (after applying the section 318 constructive ownership rules) more than 5% of the outstanding stock or stock possessing more than 5% of the total combined voting power of all stock of a corporation that is not an S corporation.
- A person who owns more than 5% of the capital or profits interest in any other business that is not a corporation.
- Family members or a member of the household who is not a family member but qualifies as a dependent on the individual income tax return of a person listed above. Family members include:
- A child (or descendant of a child),
- A sibling or step-sibling,
- A parent (or ancestor of a parent),
- A step-parent,
- A niece or nephew,
- An aunt or uncle,
- A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
Premiums paid on behalf of a former employee with no hours of service may be treated as paid on behalf of an employee for purposes of figuring the credit provided that if so treated, the former employee is also treated as an employee for purposes of the uniform percentage requirement.
Do not use premiums paid by the leasing organization to figure your credit. Also, a leased employee who is not a common law employee is considered an employee for credit purposes if he or she does all the following:
- Provides services to you under an agreement between you and a leasing organization.
- Has performed services for you (or for you and a related person) substantially full time for at least 1 year.
- Performs services under your primary direction or control.
But do not use hours, wages, or premiums paid with respect to the initial year of service on which leased employee status is based.
Employees who perform labor or services on a seasonal basis and perform labor or services for you 120 or fewer days during the tax year are not considered employees in determining FTEs and average annual wages. But premiums paid on their behalf are counted in determining the amount of the credit.
Seasonal workers include retail workers employed exclusively during holiday seasons. Seasonal workers also include workers employed exclusively during the summer.
Household and Other Nonbusiness Employees
Household employees and other employees who are not performing services in your trade or business are considered employees if they otherwise qualify as discussed above. A sole proprietor must include both business and nonbusiness employees to determine FTEs, average annual wages, and premiums paid.
MinistersA minister performing services in the exercise of his or her ministry is treated as self-employed for Social Security and Medicare purposes.
However, for credit purposes, whether a minister is an employee or self-employed is determined under the common law test for determining worker status. Self-employed ministers are not considered employees.