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What Is IRS Form 8941? It’s a Tax Credit for Small Business

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Small businesses use IRS Form 8941 in order to claim a tax credit for the health insurance premiums they pay for their employees. To qualify for this tax credit, the business must have fewer than 25 employees with an average annual wages exceeding not more than $55,000k. The tax credit is maximum for 50% of the premium paid or for tax-exempt employers, with a maximum of 35%. 

Will IRS Form 8941 reduce my taxes?

The form 8941 can help to reduce taxes or small businesses by providing a tax credit for the health insurance coverage that an employer has provided to his employees. This credit is an incentive for small businesses to provide coverage. 

Following are the requirements to qualify for the tax credit:

  • The annual average wages of employees should not exceed $55,000K
  • The small business must have paid at least 50% of its employees insurance premium costs.
  • The company must have fewer than 25 employees. 

The tax credit is maximum for 50% of the premium paid or for tax-exempt employers, with a maximum of 35%. If your business has more than 10 full time employees with an average annual wage of more than $27000 then your credit will be reduced. 

You May Also Read – IRS Tax Penalties on Small Business Owners

The IRS will also consider small businesses to pay a uniform premium with multiple tiers of health insurance coverage for the credit, even if that means an employer-paid less than 50%. Uniform premiums are also known as Composite Billing are for insurance plans that do not consider age, gender, and occupation when providing coverage. For more information on the tax credit, you can check IRS guidelines.

The tax credit can be claimed only for two consecutive years. 

Where can I find Form 8941?

You can find Form 8941 here.

Do I need to fill out IRS form 8941 and IRS Form 3800?

IRS Form 3800 is a summary of all the tax credits, small businesses are filing their income taxes. If a business is filling out form 8941 for a tax credit for the health insurance coverage for its employees then they are also required to include that information on form 3800. 

Also Read – IRS Tax Relaxation Deadlines for Covid-19 (With State Regulations)

Other credits that require this form to be filed include:

  • Work opportunity credit
  • New markets credit
  • Distilled spirits credit
  • Disabled access credit
  • Alternative Motor vehicle credit
  • Biodiesel and renewable diesel fuel credit
  • Differential wage payments credit
  • Employer provided childcare facilities and services credit
  • Empowerment zone and renewal community employment credit
  • Increased research activities credit
  • Indian employment credit
  • Low income housing credit
  • Mine rescue team training credit
  • Non-conventional source fuel credit
  • Pension plan startup costs credit
  • Plug-in electric drive vehicle credit
  • Plug-in electric drive motor vehicle credit
  • Renewable energy, alternative fuels and non-conventional fuels credit
  • Social Security and Medicare taxes (paid on Employee tips) credit

A full list of credits can be found on IRS website Form 3800.

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