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Generating Form 8941 Credit for Small Employer Health Insurance Premiums

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Generating Form 8941 Credit for Small Employer Health Insurance Premiums

How do I generate Form 8941, Credit for Small Employer Health Insurance Premiums?

Solution Description

Eligible small employers can us Form 8941 to calculate the credit for small employer health insurance premiums beginning in the 2010 tax year.  The credit is limited by the percentages of premiums the employer paid during the tax year for certain health insurance coverage the employer provided to certain employees.

For more information see form instructions.

To generate Form 8941 Small Employer Health Insurance Premiums Credit for a Partnership:

  1. Go to Screen 20.2, Other Credits
  2. Scroll down to the Credit for Small Employer Health Insurance Premiums (8941) section
  3. Check the box for Eligible to claim credit (credit was not claimed on 2014 return.  See Form 8941, line C) (Mandatory)
  4. Select the Small Group Market*Note- Select the biggest small group market in which the employer provides health care coverage. This entry can be overridden at the employee level if the employer has employees in more than one market. This list may be expanded by the Secretary of Health and Human Services if that office determines separate average premiums will apply for areas within a state.
  5. Complete the employee grid to enter detailed information for each employee:
    • Name or ID - This description is not printed on any form included in the tax return, but is included in worksheets that show Form 8941 calculations.
    • Wages Paid - This amount is used to compute average wages on Form 8941.
    • Hours of Service [O] - The program assumes employees have a full year's worth of Hours of Service (2,080). If an employee has less, enter an amount to override the program default.
    • Employee Coverage - An entry is required for the program to consider the employee enrolled in a qualified plan. The program also uses this entry when computing the small market rate premiums.
    • Small Group Market [O] - To override the default entry above the grid, select the small group market in which the employee has health care coverage. This list may be expanded by the Secretary of Health and Human Services if that office determines separate average premiums will apply for areas within a state.
    • Employer Premiums Paid -This is an employee by employee entry because the calculation of allowed premiums (smaller of premiums paid or small group market rates) is applied at the employee level and must be pro-rated when an employee is not covered for the entire year.
    • Percentage of Premiums Paid [O] - The program assumes the employer pays 100% of health insurances premiums for purposes of this credit calculation. Enter an amount to override the program assumption. This entry will be used to calculate the small group market premium reported on Worksheet 4.
    • Percentage of Year Enrolled (xx.xx)[O] - The program assumes each employee with an entry in "Coverage" is a full year employee for purposes of this credit calculation. Enter an amount to override the program assumption. This entry will be used to calculate the small group market premium reported on Worksheet 4.
  6.  If the employee grid is not used, overrides are available for Form 8941 in the entries below the grid.

The calculated amount to be passed through to the partners will be on Line 16 of Form 8941.  From here, the amount flows to Line 15f of the Schedule K and allocated to the partners on the Schedule K-1 (1065) box 15 with a code P Other Credits. Details of the credit will be on the Supplemental information page for the K-1.

An adjustment for the Small Employer Health Insurance Premiums Credit will be made on Page 1, Line 20 of the Form 1065 in the amount of the credit.

To generate Form 8941 Small Employer Health Insurance Premiums Credit for a Corporation:

  1. Go to Screen 28, General Business Credits.
  2. Scroll down to the Small Employer Health Insurance Premiums Credit (8941) section
  3. Check the box Eligible to claim credit (credit was not claimed on 2014 return.  See Form 8941, line C) (Mandatory)
  4. Select a State from the Small group market drop down menu*Note- Select the biggest small group market in which the employer provides health care coverage. This entry can be overridden at the employee level if the employer has employees in more than one market. This list may be expanded by the Secretary of Health and Human Services if that office determines separate average premiums will apply for areas within a state.
  5. Complete the employee grid to enter detailed information for each employee:
    • Name or ID - This description is not printed on any form included in the tax return, but is included in worksheets available to you for reviewing Form 8941 calculations.
    • Wages Paid - This amount is used to compute average wages on Form 8941.
    • Hours of Service [O] - The program assumes employees have a full year's worth of Hours of Service (2,080). If an employee has less, enter an amount to override the program default.
    • Coverage 1=Single, 2=Family - An entry is required for the program to consider the employee enrolled in a qualified plan. The program also uses this entry when computing the small market rate premiums.
    • Small Group Market [O] - To override the default entry above the grid, select the small group market in which the employee has health care coverage. This list may be expanded by the Secretary of Health and Human Services if that office determines separate average premiums will apply for areas within a state.
    • Employer Premiums Paid - This is an employee by employee entry because the calculation of allowed premiums (smaller of premiums paid or small group market rates) is applied at the employee level and must be pro-rated when an employee is not covered for the entire year.
    • Percentage of Premiums Paid [O] - The program assumes the employer pays 100% of health insurances premiums for purposes of this credit calculation. Enter an amount to override the program assumption. This entry will be used to calculate the small group market premium reported on Worksheet 4.
    • Percentage of Year Enrolled [O] - The program assumes each employee with an entry in "Coverage" is a full year employee for purposes of this credit calculation. Enter an amount to override the program assumption. This entry will be used to calculate the small group market premium reported on Worksheet 4.
  6.  If the employee grid is not used, overrides are available for Form 8941 in the entries below the grid.

The calculated amount on Form 8941, Line 16 will go to Line 4h of Form 3800, Part III.  The allowable credit flows to the Schedule J (1120) Line 5c.

An adjustment for the Small Employer Health Insurance Premiums Credit will be made on Page 1, Line 26 of the Form 1120 in the amount of the credit.  This adjustment can be overridden in Screen 20, Deductions, under Deductions > Other in Reduction for small employer health insurance premiums credit [O].

To generate Form 8941 Small Employer Health Insurance Premiums Credit for a S Corporation:

  1. Go to Screen 26.2, Credits (Schedule K)
  2. Scroll down to the Small Employer Health Insurance Premiums Credit (8941) section
  3. Check the box Eligible to claim credit (credit was not claimed on 2014 return.  See Form 8941, line C) (Mandatory)
  4. Select a State from the "Small group market" drop down menu*Note- Select the biggest small group market in which the employer provides health care coverage. This entry can be overridden at the employee level if the employer has employees in more than one market. This list may be expanded by the Secretary of Health and Human Services if that office determines separate average premiums will apply for areas within a state.
  5. Complete the employee grid to enter detailed information for each employee:
    • Name or ID - This description is not printed on any form included in the tax return, but is included in worksheets available to you for reviewing Form 8941 calculations.
    • Wages Paid - This amount is used to compute average wages on Form 8941.
    • Hours of Service [O] - The program assumes employees have a full year's worth of Hours of Service (2,080). If an employee has less, enter an amount to override the program default.
    • Coverage 1=Single, 2=Family - An entry is required for the program to consider the employee enrolled in a qualified plan. The program also uses this entry when computing the small market rate premiums.
    • Small Group Market [O] - To override the default entry above the grid, select the small group market in which the employee has health care coverage. This list may be expanded by the Secretary of Health and Human Services if that office determines separate average premiums will apply for areas within a state.
    • Employer Premiums Paid - This is an employee by employee entry because the calculation of allowed premiums (smaller of premiums paid or small group market rates) is applied at the employee level and must be pro-rated when an employee is not covered for the entire year.
    • Percentage of Premiums Paid [O] - The program assumes the employer pays 100% of health insurances premiums for purposes of this credit calculation. Enter an amount to override the program assumption. This entry will be used to calculate the small group market premium reported on Worksheet 4.
    • Percentage of Year Enrolled [O] - The program assumes each employee with an entry in "Coverage" is a full year employee for purposes of this credit calculation. Enter an amount to override the program assumption. This entry will be used to calculate the small group market premium reported on Worksheet 4.
  6. If the employee grid is not used, overrides are available for Form 8941 in the entries below the grid.

The calculated amount to be passed through to the partners will be on Line 16 of Form 8941. From here, the amount flows to Line 13g of the Schedule K and allocated to the shareholders on the Schedule K-1 (1120S) box 13 with a code P, Other Credits.  Details of the credit will be on the Supplemental information page for the K-1.

An adjustment for the Small Employer Health Insurance Premiums Credit will be made on Page 1, Line 19 of the Form 1120S in the amount of the credit.  This adjustment can be overridden in Screen 15, Deductions, under Deductions > Other in Reduction for small employer health insurance premiums credit [O].

The Form 8941 Credit for Small Employer Health Insurance Premiums is claimed as a refundable credit on Form 990-T for an exempt organization:

  1. Go to Screen 45, Credits (990-T).
  2. Scroll down to the Credit for Small Employer Health Insurance Premiums (8941) section
  3. Check the box Eligible to claim credit (credit was not claimed on 2014 return.  See Form 8941, line C) (Mandatory)
  4. Check the box, "Filing Form 990-T for Form 8941 credit only" (This credit is only available with Form 990-T. Check this box, if filing a Form 990-T only to claim this credit)
  5. Select a State from the "Small group market" drop down menu*Note- Select the biggest small group market in which the employer provides health care coverage. This entry can be overridden at the employee level if the employer has employees in more than one market. This list may be expanded by the Secretary of Health and Human Services if that office determines separate average premiums will apply for areas within a state.
  6. Complete the employee grid to enter detailed information for each employee:
    • Name or ID - This description is not printed on any form included in the tax return, but is included in worksheets available to you for reviewing Form 8941 calculations.
    • Wages Paid - This amount is used to compute average wages on Form 8941.
    • Hours of Service [O] - The program assumes employees have a full year's worth of Hours of Service (2,080). If an employee has less, enter an amount to override the program default.
    • Coverage 1=Single, 2=Family - An entry is required for the program to consider the employee enrolled in a qualified plan. The program also uses this entry when computing the small market rate premiums.
    • Small Group Market [O] - To override the default entry above the grid, select the small group market in which the employee has health care coverage. This list may be expanded by the Secretary of Health and Human Services if that office determines separate average premiums will apply for areas within a state.
    • Employer Premiums Paid - This is an employee by employee entry because the calculation of allowed premiums (smaller of premiums paid or small group market rates) is applied at the employee level and must be pro-rated when an employee is not covered for the entire year.
    • Percentage of Premiums Paid [O] - The program assumes the employer pays 100% of health insurances premiums for purposes of this credit calculation. Enter an amount to override the program assumption. This entry will be used to calculate the small group market premium reported on Worksheet 4.
    • Percentage of Year Enrolled [O] - The program assumes each employee with an entry in "Coverage" is a full year employee for purposes of this credit calculation. Enter an amount to override the program assumption. This entry will be used to calculate the small group market premium reported on Worksheet 4.
  7. If the employee grid is not used, overrides are available for Form 8941 in the entries below the grid.
  8. Enter the total amount of certain payroll taxes in, Payroll taxes paid for purposes of this credit.  This amount flows to Form 8941, line 19.

The calculated amount will be on Form 8941, line 20. This amount will flow to the 990-T, line 45f.

To generate Form 8941 Small Employer Health Insurance Premiums Credit for a Schedule C or F in the Individual module:

  1. Go to Screen 34, General Business & Passive Activities Credits.
  2. Enter the Name of activity
  3. Select the applicable Form (Ctr+T) (Schedule C or Schedule F) and select the Activity name or number (Ctrl+T) under the Credits section
  4. Select Taxpayer, Spouse, Joint.  (Lacerte will default to Taxpayer)
  5. Scroll down to the Small employer Health Insurance Premiums Credit (8941) section
  6. If applicable, check the box Paid premiums for health coverage through a SHOP marketplace and enter the Marketplace Identifier
    1. Note:  If premiums were not paid through a SHOP marketplace, line A of form 8941 indicates you should not file form 8941.
  7. Select a State from the "Small group market" drop down menu*Note- Select the biggest small group market in which the employer provides health care coverage. This entry can be overridden at the employee level if the employer has employees in more than one market. This list may be expanded by the Secretary of Health and Human Services if that office determines separate average premiums will apply for areas within a state.
  8. Complete the employee grid to enter detailed information for each employee:
    • Name or ID - This description is not printed on any form included in the tax return, but is included in worksheets available to you for reviewing Form 8941 calculations.
    • Wages Paid - This amount is used to compute average wages on Form 8941.
    • Hours of Service [O] - The program assumes employees have a full year's worth of Hours of Service (2,080). If an employee has less, enter an amount to override the program default.
    • Coverage 1=Single, 2=Family - An entry is required for the program to consider the employee enrolled in a qualified plan. The program also uses this entry when computing the small market rate premiums.
    • Small Group Market [O] - To override the default entry above the grid, select the small group market in which the employee has health care coverage. This list may be expanded by the Secretary of Health and Human Services if that office determines separate average premiums will apply for areas within a state.
    • Employer Premiums Paid - This is an employee by employee entry because the calculation of allowed premiums (smaller of premiums paid or small group market rates) is applied at the employee level and must be pro-rated when an employee is not covered for the entire year.
    • Percentage of Premiums Paid [O] - The program assumes the employer pays 100% of health insurances premiums for purposes of this credit calculation. Enter an amount to override the program assumption. This entry will be used to calculate the small group market premium reported on Worksheet 4.
    • Percentage of Year Enrolled [O] - The program assumes each employee with an entry in "Coverage" is a full year employee for purposes of this credit calculation. Enter an amount to override the program assumption. This entry will be used to calculate the small group market premium reported on Worksheet 4.
  9. If the employee grid is not used, overrides are available for Form 8941 in the entries below the grid

The program will calculate the program based on this information and will not automatically reduce expenses for the small employer health insurance premiums credit on the Schedule C or F.  To do this, use the input the amount in Health insurance premiums for Form 8941 credit, which is located in Screen 16 for a Schedule C under the Expenses section and Screen 19 for a Schedule F under the Farm Expenses section.  This amount will reduce the amount of insurance expense taken to eliminate double counting of the amount.  This field does not print directly on a field in the tax return. It reduces the amount reported on the Schedule C for Employee Benefit Programs.

For example:

A company pays $1,000 for employee benefit programs that are health insurance premiums. The company files Form 8941 and receives a credit of $500. The $500 must be entered in the field "Health insurance premiums reduction for Form 8941 credit" (code 338) on screen 16.

The amount of Employee Benefit Programs reported on the Schedule C will now report $500, and the remaining $500 will be in the form of a credit on Form 8941.

The program will generate a diagnostic if the amount of the credit does not equal the amounts entered here.

Form 8941 reports on General Business Credits Form 3800, Part III, Line 4h

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