Sole Proprietor Health Insurance

Still time for small businesses for health care tax credits

Small business owners in Connecticut may still have time to claim a tax credit for health care premiums they paid on behalf of employees for 2010.

Because of Tropical Storm Irene, taxpayers have until Oct. 31 to claim tax relief for tax year 2010 if they have expanded their 2010 tax return. They can also claim the credit by filing an amended tax return in 2010 (companies use Form 1120X and individual sole proprietors to use Form 1040X).

For 2010 to 2013, small businesses with 25 or fewer workers are eligible for health care small business tax credit of 35 percent of premiums paid, as long as the average income for employees (excluding owners and members of the family) is on average $ 50 000 or less for 2010. Eligible tax-exempt organizations will receive a maximum credit of 25 percent of premiums paid.

To qualify, the employer must pay at least half of health insurance premiums for employees under a qualifying arrangement. To determine if you qualify for the credit:

1.Determine the total full-time (40 hours or more per week) employees (do not expect the owners or family members). Add the full-time equivalent of part-time employees (divide the total number of annual hours of part-time workers in 2080). The sum will give all employees. If the number is 25 or older, you do not have quality.

2. Take the total annual salaries paid to these employees and divide by the number of employees from number 1. If the result is less than $ 50,000 and you pay at least half of the insurance premium, you are probably eligible.

Since 2014, the maximum tax credit of up to 50 percent of premiums paid by eligible employers of small businesses (and 35 percent of premiums paid by eligible tax-exempt organizations).

To claim the credit, use Form 8941 Credit for health insurance premiums for small employers. Then proceed to Form 3800 General Business Credit. Sole proprietors, partners and S-Corporation shareholders would then report the credit on line 53 of Form 1040. Tax-exempt organizations that file on a calendar year and requested a file extension to Nov.15 can use Form 8941 and claim the credit on Form 990-T, line 44f.

Small Business Tax Questions – Should You Incorporate Your Sole ...

1. The tax savings. There are many tax deductions and other tax reduction strategies available to a company that are not available to individual enterprise. For example, if a sole proprietor can deduct health insurance premiums to the extent of his / her profits. So if you have a loss on Schedule C, you do not get to deduct your premiums and it is lost forever. If you have a small profit, but your income is less than your cost of insurance, the excess of the premium on profit is a net loss. AC corporation can deduct health insurance regardless of the bottom line.

Another example would be the potential savings from self-employment tax for an S corporation In a sole proprietorship, all profits are subject to SE tax (limited to the current government). In an S corporation, only salaries paid to the shareholder / employee would be subject to payroll taxes (the equivalent of the SE tax) without any benefit specified in Annex K-1 avoids payroll tax law.

2. Limited. Generally, a sole proprietor has unlimited liability.An insurance policy can certainly offer protection within the policy, but after that it is possible that legal proceedings against the company will be satisfied by the use of personal assets. A corporation provides limited liability, meaning that the owner shall be responsible only to the extent of their investment in the company. In general, personal property is not available to satisfy claims against the company.

Disadvantages. 1. Paperwork. You must file articles with your state to form the company, and prepare other documents such as regulations.You must hold a regular meeting of the directors and shareholders, and to document these meetings with minutes and other important decisions with the resolutions of the company. All this paperwork is commonly called "business formalities." If you are a corporation, you must look like one and act as one, otherwise you run the risk of losing your corporate status.

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