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Issue 36545

Form 8941- Health Care Credit for businesses

Project Statement: Determine Form 8941, Credit for Small Employer Health Insurance Premiums, clearly communicates appropriate guidance to the public.

Goal Statement: The goal of this project is to review and make recommendations to the IRS that will enhance customer service and improve the taxpayer’s experience.

TAP RECOMMENDATION

ID 1666 you may be entitled to a credit. Proceed ahead with preparation of this form. In Line C, after the answer “Yes,” the Taxpayer is told to stop since they are not entitled to the credit. After the answer “no,” there is no further explanation. A taxpayer who answers no may think that means no credit is allowed while the contrary is the case. As a result, guidance should be added to alert the taxpayers that they still may get the credit and need to continue to fill out the form.

Form 8941 Instructions, page 1, left-hand column, Reminder section

IRS Action:Partially adopted

ID 1666 No. No, you may be entitled to a credit. Proceed ahead with preparation of this form. In Line C, after the answer “Yes,” the Taxpayer is told to stop since they are not entitled to the credit. After the answer “no,” there is no further explanation. A taxpayer who answers no may think that means no credit is allowed while the contrary is the case. As a result, guidance should be added to alert the taxpayers that they still may get the credit and need to continue to fill out the form.

Adopt with changes to be consistent with TFP style. No. Go to line 1. See instructions.

TAP RECOMMENDATION

ID 1667 Employers in Hawaii can’t claim this credit for insurance premiums paid for health plan years beginning after 2016. For more information, see Waiver for Hawaii in the instructions for line A. Employers in Hawaii can’t claim this credit for insurance premiums paid for health plan years beginning after 2016. For more information, see Waiver for Hawaii in the instructions for line A.

TIP. If you do not qualify for the credit, most employers can claim a deduction for employee premium payments, which can also help to defray the costs of providing health insurance for employees. Many small taxpayers will discover the credit is not available for them. It would be helpful to let them know the tax laws still offer assistance in bearing the cost of providing health insurance by allowing a tax deduction.

Form 8941 Instructions, page 1, right-hand column, under Eligible Small Employers

IRS Action:Not adopted

ID 1667 Employers in Hawaii can’t claim this credit for insurance premiums paid for health plan years beginning after 2016. For more information, see Waiver for Hawaii in the instructions for line A. Employers in Hawaii can’t claim this credit for insurance premiums paid for health plan years beginning after 2016. For more information, see Waiver for Hawaii in the instructions for line A.

TIP. If you do not qualify for the credit, most employers can claim a deduction for employee premium payments, which can also help to defray the costs of providing health insurance for employees. Many small taxpayers will discover the credit is not available for them. It would be helpful to let them know the tax laws still offer assistance in bearing the cost of providing health insurance by allowing a tax deduction.

Non-Adopt – Out of scope and not applicable. Hawaii has a long- standing state law, referred to as the Prepaid Health Care Act, which requires virtually all employers to offer coverage to their employees and provides small employers premium assistance. Because of that, Hawaii has received a 5-year waiver for SHOP requirement.

TAP RECOMMENDATION

ID 1668 2. You had fewer than 25 full-time equivalent employees (FTEs) for the tax year. You may be able to meet this requirement even if you had 25 or more employees. For details, see Worksheets 1 and 2. 2. You had fewer than 25 full-time equivalent employees (FTEs) for the tax year. You may be able to meet this requirement even if you had 25 or more employees. For example, an employer with 48 employees that are each half-time employees has 24 FTEs and can claim the credit. For details, see Worksheets 1 and 2. The example will help illustrate how the general statement may apply to some taxpayers.

Form 8941 Instructions, page 1, right-hand column, under Eligible Small Employers

IRS Action:Adopted

ID 1668 2. You had fewer than 25 full-time equivalent employees (FTEs) for the tax year. You may be able to meet this requirement even if you had 25 or more employees. For details, see Worksheets 1 and 2. 2. You had fewer than 25 full-time equivalent employees (FTEs) for the tax year. You may be able to meet this requirement even if you had 25 or more employees. For example, an employer with 48 employees that are each half-time employees has 24 FTEs and can claim the credit. For details, see Worksheets 1 and 2. The example will help illustrate how the general statement may apply to some taxpayers.

Adopt.

TAP RECOMMENDATION

ID 1669 TIP. Although the term “eligible small employer” is defined in the Internal Revenue Code to include employers with “no more in the Internal Revenue Code to include employers with “no more to claim the credit……. TIP. Partnerships, S corporations, C corporations, sole-proprietorships, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim than” 25 FTEs, the phaseout of the credit amount operates in such a way that an employer with exactly 25 FTEs is not, in fact, eligible for the credit. TIP CAUTION. Although the term “eligible small employer” is defined in the Internal Revenue Code to include employers with “no more than” 25 FTEs, the phaseout of the credit amount operates in such a way that an employer with exactly 25 FTEs is not, in fact, eligible for the credit. A TIP indicates a point to help the taxpayer get a greater tax benefit. This TIP advises the taxpayer that with exactly 25 FTEs, the taxpayer gets no credit. Thus, a CAUTION is a better indicator for the point being made. Form 8941 instructions, page 1, column 2, the first full paragraph

IRS Action:Adopted

ID 1669 TIP. Although the term “eligible small employer” is defined in the Internal Revenue Code to include employers with “no more in the Internal Revenue Code to include employers with “no more to claim the credit……. TIP. Partnerships, S corporations, C corporations, sole-proprietorships, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim than” 25 FTEs, the phaseout of the credit amount operates in such a way that an employer with exactly 25 FTEs is not, in fact, eligible for the credit. TIP CAUTION. Although the term “eligible small employer” is defined in the Internal Revenue Code to include employers with “no more than” 25 FTEs, the phaseout of the credit amount operates in such a way that an employer with exactly 25 FTEs is not, in fact, eligible for the credit. A TIP indicates a point to help the taxpayer get a greater tax benefit. This TIP advises the taxpayer that with exactly 25 FTEs, the taxpayer gets no credit. Thus, a CAUTION is a better indicator for the point being made. Form 8941 instructions, page 1, column 2, the first full paragraph

Adopt.

TAP RECOMMENDATION

ID 1670 For all other eligible small employers, the maximum credit is 50% of premiums paid, can be taken against both regular and alternative minimum tax, and is claimed as part of the general business credit on Form 3800. For all other eligible small employers, the maximum credit is 50% of premiums paid and can be taken against both the regular and alternative minimum tax. The credit is claimed as part of the general business credit on Form 3800. The sentence as written is not grammatically correct, is too long, and is difficult to understand. Deleting the two commas and breaking it into two sentences makes it easier to read.

Form 8941 Instructions, page 1, column 2, under TIP

IRS Action:Adopted

ID 1670 For all other eligible small employers, the maximum credit is 50% of premiums paid, can be taken against both regular and alternative minimum tax, and is claimed as part of the general business credit on Form 3800. For all other eligible small employers, the maximum credit is 50% of premiums paid and can be taken against both the regular and alternative minimum tax. The credit is claimed as part of the general business credit on Form 3800. The sentence as written is not grammatically correct, is too long, and is difficult to understand. Deleting the two commas and breaking it into two sentences makes it easier to read.

Adopt.

TAP RECOMMENDATION

ID 1671 TIP. Partnerships, S corporations, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim the credit……. TIP. Partnerships, S corporations, C corporations, sole-proprietorships, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim the credit……. The TIP excludes C corporations and sole proprietorships who must also file the form in order to take the credit. The omission of these two types of taxable entities could cause confusion for the taxpayer

Form 8941 Instructions, page 3, last paragraph

IRS Action:Adopted

ID 1671 TIP. Partnerships, S corporations, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim the credit……. TIP. Partnerships, S corporations, C corporations, sole-proprietorships, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim the credit……. The TIP excludes C corporations and sole proprietorships who must also file the form in order to take the credit. The omission of these two types of taxable entities could cause confusion for the taxpayer Non-

Adopt – C corporations and sole proprietors are not pass-through entities and thus can go directly to Form 3800 if their only credit is from a pass-through entity. They should not be listed here.

TAP RECOMMENDATION

ID 1672 Wellness program. If a plan of an employer provides a wellness program, for purposes of meeting the uniform percentage requirement any additional amount of the employer contribution attributable to an employee’s participation in the wellness program over the employer contribution with respect to an employee that doesn’t participate in the wellness program isn’t taken into account in calculating the uniform percentage requirement, whether the difference is due to a discount for participation or a surcharge for nonparticipation. The employer …….. Wellness program. If a plan of an employer provides a wellness program, for purposes of meeting the uniform percentage requirement, the following applies. Any additional amount of the employer contribution attributable to an employee’s participation in the wellness program over the employer contribution with respect to an employee that doesn’t participate in the wellness program isn’t considered in calculating the uniform percentage requirement. This is true whether the difference is due to a discount for participation or a surcharge for nonparticipation. The employer …….. The existing first sentence is too long and difficult to understand. By breaking it into three separate sentences, it is easier to read and understand

Form 8941 Instructions, page 4, column 2, the TIP under Specific Instructions

IRS Action:Adopted

ID 1672 Wellness program. If a plan of an employer provides a wellness program, for purposes of meeting the uniform percentage requirement any additional amount of the employer contribution attributable to an employee’s participation in the wellness program over the employer contribution with respect to an employee that doesn’t participate in the wellness program isn’t taken into account in calculating the uniform percentage requirement, whether the difference is due to a discount for participation or a surcharge for nonparticipation. The employer …….. Wellness program. If a plan of an employer provides a wellness program, for purposes of meeting the uniform percentage requirement, the following applies. Any additional amount of the employer contribution attributable to an employee’s participation in the wellness program over the employer contribution with respect to an employee that doesn’t participate in the wellness program isn’t considered in calculating the uniform percentage requirement. This is true whether the difference is due to a discount for participation or a surcharge for nonparticipation. The employer …….. The existing first sentence is too long and difficult to understand. By breaking it into three separate sentences, it is easier to read and understand

Adopt

TAP RECOMMENDATION

ID 1673 TIP. Partnerships, S corporations, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim the credit……. TIP. Partnerships, S corporations, C corporations, sole-proprietorships, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim the credit……. This is the exact same sentence as on page 1, column 2, under TIP. The TIP excludes C corporations and sole proprietorships who must also file the form in order to take the credit. The omission of these two types of taxable entities could cause confusion for the taxpayer

IRS Action:Not adopted

ID 1673 TIP. Partnerships, S corporations, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim the credit……. TIP. Partnerships, S corporations, C corporations, sole-proprietorships, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim the credit……. This is the exact same sentence as on page 1, column 2, under TIP. The TIP excludes C corporations and sole proprietorships who must also file the form in order to take the credit. The omission of these two types of taxable entities could cause confusion for the taxpayer

Non-Adopt – C corporations and sole proprietors are not pass- through entities and thus can go directly to Form 3800 if their only credit is from a pass-through entity. They should not be listed here.

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2020 TAP Annual Report

The 2020 TAP Annual Report highlights our key recommendations to improve IRS customer service and summarizes our key accomplishments and activities, including the 237 recommendations submitted to the IRS in 2020.

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