1. HEALTHCARE TAX CREDIT
2010
PLEASE NOTE: The following pages are designed to provide a general overview of the new health reform law. It does NOT attempt to cover all of the
law’s provisions and should NOT be used as legal advice for implementation activities. GCG and SLSF recommend that you consult with your tax or legal
advisor regarding how the new requirements will affect your specific plan.
In conformity with U.S. Treasury Department Circular 230 tax advice contained in this communication and any attachments is not intended to be used, and
cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code, nor may any such tax advice be used to
promote, market or recommend to any person any transaction or matter that is the subject of this communication and any attachments.

2. Marcus Newman, CBC
GCG Financial
Bradley Greenberg, CPA
SLSF
Silver Lerner Schwartz & Fertel
Certified Public Accountants
www.slsf.com

3. Under the Patient
Protection and
Affordable Care Act
small businesses that
choose to provide health
insurance could be
eligible for a tax credit
based on their cost of
health insurance.
Source: IRS.gov

4. ―This credit provides a real boost to
eligible small businesses by helping
them afford health coverage for their
employees,‖ said IRS Commissioner
Doug Shulman. ―We urge small
businesses and tax-exempt employers
to look closely at this important tax
break — which is already effective — to
see if they qualify.‖
Doug Shulman, IRS Commissioner
(pictured above)
Source: IRS.gov

5. Small employers who contribute at
least 50% of the cost of premiums
(or 50% of a benchmark premium).
It is generally available to
employers that have fewer than
25 full-time equivalent (FTE).
Because the eligibility formula is based in part on the
number of FTEs, not the number of employees, many
businesses will qualify even if they employ more than 25
individual workers.
Eligible business will be paying
wages averaging less than
$50,000 per employee per year.
Source: IRS.gov

6. The number of an employer’s FTEs is
determined by dividing (1) the total
hours for which the employer pays
wages to employees during the year
(but not more than 2,080 hours for
any employee) by (2) 2,080.
The result, if not a whole number, is
then rounded to the next lowest
whole number.
DON’T COUNT: seasonal workers, self –
employed individuals, 2% shareholders of s-
corporations, 5% owners of a small business,
or partners of a partnership and family
members of owners.
Source: IRS.gov

7.  For the 2010 tax year, an employer
pays 5 employees wages for 2,080
hours each, 3 employees wages for
1,040 hours each, and 1 employee
wages for 2,300 hours.
 The employer’s FTEs would be
calculated as follows:(1) Total hours
not exceeding 2,080 per employee is
the sum of:
◦ a. 10,400 hours for the 5 employees paid
for 2,080 hours each (5 x 2,080)
◦ b. 3,120 hours for the 3 employees paid
for 1,040 hours each (3 x 1,040)
◦ c. 2,080 hours for the 1 employee paid
for 2,300 hours (lesser of 2,300 and
2,080)These add up to 15,600
hours(2) FTEs: 7
(15,600 divided by 2,080 = 7.5, rounded
to the next lowest whole number)
Source: IRS.gov

8. Seasonal workers are
disregarded in
determining FTEs and
average annual wages
unless the seasonal
worker works for the
employer on more than
120 days during the tax
year.
Source: IRS.gov

9. The amount of average annual wages is
determined by first dividing (1) the total
wages paid by the employer to employees
during the employer’s tax year by (2) the
number of the employer’s FTEs for the
year. The result is then rounded down to the
nearest $1,000 (if not otherwise a multiple of
$1,000).
For this purpose, wages means wages as
defined for FICA purposes (without regard to
the wage base limitation).
DON’T COUNT: seasonal workers, self –
employed individuals, 2% shareholders of s-
corporations, 5% owners of a small business,
or partners of a partnership and family
members of owners.
Source: IRS.gov

10. For the 2010 tax year, an
employer pays $224,000
in wages and has 10
FTEs. The employer’s
average annual wages
would be:
$22,000 - ($224,000
divided by 10 = $22,400,
rounded down to the
nearest $1,000)
Source: IRS.gov

11. The maximum credit goes to
smaller employers.
Those with 10 or fewer
FTEs and paying annual
FTE’s 35%
AAW average wages of $25,000
or less will receive the full
35% credit.
**50% credit in 2014 – 2015
(Additional qualifications apply)
Source: IRS.gov

12.  Dental Insurance
 Vision Insurance
 Group Long Term
Care Plans
 Medicare
Supplemental
Insurance Plans
Source: IRS.gov

13. The premiums taken into account for
the purposes of the tax credit are the
lesser of:
 %age (min. 50%) of the premiums paid, or
 %age using the ―benchmark‖ premium for the state
your company is in.
 SPECIAL TRANSITION RULE FOR 2010 APPLIES
Source: IRS.gov

14. State Employee Family State Employee Family State Employee Family
Alaska 6,204 13,723 Maine 5,215 11,887 Utah 4,238 10,935
Alabama 4,441 11,275 Michigan 5,098 12,364 Virginia 4,890 11,338
Arkansas 4,329 9,677 Minnesota 4,704 11,938 Vermont 5,244 11,748
Missouri 4,663 10,681 Washington 4,543 10,725
Arizona 4,495 10,239
Mississippi 4,533 10,501 Wisconsin 5,222 12,819
California 4,628 10,957
Montana 4,772 10,212 West Virginia 4,986 11,611
Colorado 4,972 11,437
North Car 4,920 11,583 Wyoming 5,266 12,163
Connecticut 5,419 13,484 North Dakota 4,469 10,506
D.C. 5,355 12,823 Nebraska 4,715 11,169
Delaware 5,602 12,513 New Hamp 5,519 13,624
Florida 5,161 12,453 New Jersey 5,607 13,521
Georgia 4,612 10,598 New Mexico 4,754 11,404
Hawaii 4,228 10,508 Nevada 4,553 10,297
Iowa 4,652 10,503 New York 5,442 12,867
Ohio 4,667 11,293
Idaho 4,215 9,365
Oklahoma 4,838 11,002
Illinois 5,198 12,309
Oregon 4,681 10,890
Indiana 4,775 11,222
Pennsylvania 5,039 12,471
Kansas 4,603 11,462 Rhode Island 5,887 13,786
Kentucky 4,287 10,434 South Car 4,899 11,780
Louisiana 4,829 11,074 South Dakota 4,497 11,483
Mass 5,700 14,138 Tennessee 4,611 10,369
Maryland 4,837 11,939 Texas 5,140 11,972
Source: IRS.gov

15. Eligible small businesses can
claim the credit as part of the
general business credit starting
with the 2010 income tax return
they file in 2011 for health
insurance premium payments
made after 12-31-09.
For tax-exempt employers, the
IRS will provide further
information on how to claim the
credit.
Source: IRS.gov

16. The TAX CREDIT is in the News!
Catherine Clifford
CNN Money . Com
April15, 2010
…In a rough economy, every
dollar saved is vital. "It might
not match what [health care
costs] increase in a year ---
but wow, that is sure helpful,"
Phelps of Oakbrook Esser
Studios said of the tax break.
"It helps take that total
burden off the company."…. Associated Press
FOX News . com
May 17, 2010
…The White House estimates up
to 4 million small businesses
may qualify for the tax credit,
but it's not clear how many will
be eligible.....

17. Determine Calculate Verify
Source: IRS.gov

18. Determine the total number of your employees
(not counting owners, family members or seasonal employees):
Full-time employees:
(enter the number of employees who work 40 hours each week or
more)
Full-time equivalent (of part-time) people:
(divide the total annual number of part-time hours worked by 2080)
If these numbers add up to 25 or less then go on to the next step.
Source: IRS.gov

19. Calculate the average annual wages of employees (not counting
owners, family members or seasonal employees):
Take the total annual wages paid to employees:
Then divide it by the number of FTE determined in STEP 1:
This number is your average annual wage (AAW):
If the result is less than $50,000 then go to the next step.
Source: IRS.gov

20. You must be paying at least 50% of the
health insurance premium cost for your
single employees in order to be eligible for
the CREDIT.
If you believe you are eligible for the TAX
CREDIT contact your accountant to
determine the amount.
Source: IRS.gov

21. Example:
Calculating the credit phase-out if the
number of FTEs exceeds 10 or average
annual wages exceeds $25,000.
For the 2010 taxable year, a taxable
eligible small employer has 12 FTEs and
average annual wages of $30,000. The
employer pays $96,000 in health
insurance premiums for its employees
(which does not exceed the ―benchmark‖
premium in the employer’s state) and
otherwise meets the requirements for the
credit.

22.  The initial amount of  Total credit reduction
the credit determined is equal to $11,200
before any reduction ($4,480 + $6,720)
is $33,600 ($96,000 x 35%)  The total 2010 tax
credit equals
 Credit reductions for $22,400 ($33,600 - $11,200)
FTEs (12) in excess
of 10 is equal to
$4,480 ($33,600 x 2/15)
 The Credit reduction
for average annual
wages in excess of
$25,000 is equal to
$6,720 ($33,600 x $5000/$25000)

23.  It will be claimed on the
EMPLOYER’s annual income
tax return.
 It CANNOT be used against
employment taxes.
 NON-REFUNDABLE Credit
◦ But, it can be rolled over to
following years’ tax returns
(back 1 and forward 20)
 The amount of premium that
can be deducted is reduced by
the amount of the TAX CREDIT

24. INFORMATIONAL LINKS
www.irs.gov
Tax Credit Article
www.irs.gov/newsroom/article/0,,id=220848,00.html
Tax Credit FAQ’s
www.irs.gov/newsroom/article0,,id=220839,00.html
Revenue Notice 2010-44 (from 5/17/2010)
www.irs.gov/pub/irs-drop/n-10-44.pdf
PLEASE NOTE: The preceding pages are designed to provide a general overview of the new health reform law. It does NOT attempt to cover all of
the law’s provisions and should NOT be used as legal advice for implementation activities. GCG and SLSF recommend that you consult with your tax
or legal advisor regarding how the new requirements will affect your specific plan.
In conformity with U.S. Treasury Department Circular 230 tax advice contained in this communication and any attachments is not intended to be used,
and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code, nor may any such tax advice be used
to promote, market or recommend to any person any transaction or matter that is the subject of this communication and any attachments.

25. Bradley Greenberg, CPA Marcus Newman, CBC
SLSF GCG Financial
bgreenberg@slsf.com Marcus.Newman@gcgfinancial.com
Direct: 847.779.6206 Direct: 847.457.3058
Silver Lerner Schwartz & Fertel
Certified Public Accountants
www.slsf.com

26. Brought to you by the
Accounting Firm of:
Silver Lerner Schwartz & Fertel
Certified Public Accountants
www.slsf.com
In conjunction with our HEALTHCARE
friends at
GCG Financial, Inc.
Employee Benefits
TAX CREDIT
Consultants
Thank you for your time!