Unclaimed tax credit could reduce business health care costs

The tax filing season is a stressful time for many business owners in Illinois, and the complexities of the U.S. tax code often lead to credits, exemptions and deductions being missed. An example of this is the Small Employer Health Care Insurance Tax Credit, which is only claimed by about 13 percent of eligible employers. The credit, which was introduced as part of the 2010 Affordable Care Act, is available to employers with fewer than 25 full-time workers earning less than a specified amount per year on average. In 2016, that amount is $51,800.

The credit allows employers who offer health insurance coverage under the Small Business Health Options Program and pay 50 percent or more of their workers' premiums to receive a credit for up to half of their annual contributions. Businesses that owe no tax may carry the credit forward or apply it to taxes owed in previous years, and any contributions not covered can still be deducted as a business expense.

A March 2016 report from the Government Accountability Office concluded that the complex nature of claiming the the credit was a deterrent to business owners. While receiving a credit for 50 percent of employer health insurance contributions may sound attractive to entrepreneurs, few small businesses actually qualify for this amount. Other problems highlighted by the GAO include strict time frames, cost and complexity issues and a lack of awareness among business owners that the credit is available.

One factor that the GAO may have overlooked is the inherent mistrust of the IRS common among entrepreneurs. Errors are easy to make when claiming complex tax credits and deductions, and even innocent mistakes can trigger audits. Experienced business tax attorneys may understand these concerns, and they could assist business owners by advocating on their behalf with the IRS.

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