Specific Instructions

Partnerships, S corporations, cooperatives, estates, trusts, and tax-exempt eligible small employers must file this form to claim the credit. All other taxpayers must not complete or file this form if their only source for this credit is a partnership, S corporation, cooperative, estate, or trust. Instead, they must report this credit directly on line 4h in Part III of Form 3800.

Use Worksheets 1 through 7 to figure the amounts to report on various lines of Form 8941.

  • Use Worksheets 1, 2, and 3 to figure the amounts to report on lines 1, 2, and 3 of Form 8941.

  • Use Worksheet 4 to figure the amounts to report on lines 4, 5, and 13 of Form 8941.

  • Use Worksheets 5, 6, and 7 to figure the amounts to report on lines 8, 9, and 14 of Form 8941.

Line A

Answer "Yes" if one of the following applies.

  • You paid premiums for employee health insurance coverage you provided through a SHOP Marketplace or through a direct enrollment process, if available in your state.

  • You qualify for an exception to this requirement as discussed below.

If you answer "Yes" because you paid premiums for employee health insurance coverage you provided through a SHOP Marketplace, enter the Marketplace identifier, if any.

If you answer "No," do not file Form 8941 unless you are filing it for a partnership, S corporation, cooperative, estate, trust, or tax-exempt eligible small employer that received from another entity a credit that must be reported on line 15. For more information, see the instructions for line 15.

Exception for certain employers in Washington and Wisconsin.   For calendar year 2014, SHOP Marketplaces in certain counties of Washington and Wisconsin will not have qualified health plans available for employers to offer to employees. Transition relief allows employers with a principal business address in the counties listed below to claim the credit for their tax year beginning in 2014. For details, see Notice 2014-6, 2014-2 I.R.B. 279, available at www.irs.gov/irb/2014-2_IRB/ar16.html.

Washington:   Adams, Asotin, Benton, Chelan, Clallam, Columbia, Douglas, Ferry, Franklin, Garfield, Grant, Grays Harbor, Island, Jefferson, King, Kitsap, Kittitas, Klickitat, Lewis, Lincoln, Mason, Okanogan, Pacific, Pend Oreille, Pierce, San Juan, Skagit, Skamania, Snohomish, Spokane, Stevens, Thurston, Wahkiakum, Walla Walla, Whatcom, Whitman, and Yakima counties.

Wisconsin:   Green Lake, Lafayette, Marquette, Florence, and Menominee counties.

Worksheet 1. Information Needed To Complete Line 1 and Worksheets 2 and 3

If you need more rows, use a separate sheet and include the additional amounts in the totals below.

(a) 
Individuals 
Considered 
Employees
(b) 
Employee 
Hours of 
Service
(c) 
Employee 
Wages 
Paid
1.    
2.    
3.    
4.    
5.    
6.    
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8.    
9.    
10.    
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12.    
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14.    
15.    
16.    
17.    
18.    
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23.    
24.    
25.    
 
 
Totals:
   

Column (a), Individuals Considered Employees

Enter the name or other identifying information for all individuals considered employees for purposes of this credit.

In general, all employees who perform services for you during the tax year are taken into account in determining your FTEs, average annual wages, and premiums paid. Rules that apply to certain types of employees are discussed below.

Excluded employees.   The following individuals are not considered employees when you figure this credit. Hours and wages of these employees and premiums paid for them are not counted when you figure your credit.
  • The owner of a sole proprietorship.

  • A partner in a partnership.

  • A shareholder who owns (after applying the section 318 constructive ownership rules) more than 2% of an S corporation.

  • A shareholder who owns (after applying the section 318 constructive ownership rules) more than 5% of the outstanding stock or stock possessing more than 5% of the total combined voting power of all stock of a corporation that is not an S corporation.

  • A person who owns more than 5% of the capital or profits interest in any other business that is not a corporation.

  • Family members or a member of the household who is not a family member but qualifies as a dependent on the individual income tax return of a person listed above. Family members include a child (or descendant of a child), a sibling or step-sibling, a parent (or ancestor of a parent), a step-parent, a niece or nephew, an aunt or uncle, or a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. A spouse is also considered a family member for this purpose.

Former employees.   Premiums paid on behalf of a former employee with no hours of service may be treated as paid on behalf of an employee for purposes of figuring the credit provided that, if so treated, the former employee is also treated as an employee for purposes of the uniform percentage requirement.

Leased employees.   Do not use premiums paid by the leasing organization to figure your credit. Also, a leased employee who is not a common law employee is considered an employee for credit purposes if he or she does all the following.
  • Provides services to you under an agreement between you and a leasing organization.

  • Has performed services for you (or for you and a related person) substantially full time for at least 1 year.

  • Performs services under your primary direction or control.

  But do not use hours, wages, or premiums paid with respect to the initial year of service on which leased employee status is based.

Seasonal employees.   Employees who perform labor or services on a seasonal basis and perform labor or services for you 120 or fewer days during the tax year are not considered employees in determining FTEs and average annual wages. But premiums paid on their behalf are counted in determining the amount of the credit. Seasonal workers include retail workers employed exclusively during holiday seasons. Seasonal workers also include workers employed exclusively during the summer.

Household and other nonbusiness employees.   Household employees and other employees who are not performing services in your trade or business are considered employees if they otherwise qualify as discussed above. A sole proprietor must include both business and nonbusiness employees to determine FTEs, average annual wages, and premiums paid.

Ministers.   A minister performing services in the exercise of his or her ministry is treated as self-employed for social security and Medicare purposes. However, for credit purposes, whether a minister is an employee or self-employed is determined under the common law test for determining worker status. Self-employed ministers are not considered employees.

Column (b), Employee Hours of Service

Enter the total hours of service for the tax year for each employee listed in column (a). Do not enter more than 2,080 hours for any employee. But enter -0- for seasonal employees who worked 120 or fewer days during the tax year.

Employee hours of service.   An employee’s hours of service for a year include the following.
  • Each hour for which the employee is paid, or entitled to payment, for the performance of duties for the employer during the employer’s tax year.

  • Each hour for which an employee is paid, or entitled to payment, by the employer on account of a period of time during the employer's tax year during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence (except that no more than 160 hours of service are required to be counted for an employee on account of any single continuous period during which the employee performs no duties).

  To figure the total number of hours of service you must take into account for an employee for the year, you can use any of the following methods.

Actual hours worked method.

Determine actual hours of service from records of hours worked and hours for which payment is made or due (payment is made or due for vacation, holiday, illness, incapacity, etc., as described above).

Days-worked equivalency method.

Use a days-worked equivalency whereby the employee is credited with 8 hours of service for each day for which the employee would be required to be credited with at least one hour of service under the rules described above.

Weeks-worked equivalency method.

Use a weeks-worked equivalency whereby the employee is credited with 40 hours of service for each week for which the employee would be required to be credited with at least one hour of service under the rules described above.

Column (c), Employee Wages Paid

Complete Worksheet 2 before you complete column (c) of Worksheet 1. Do not complete column (c) if Worksheet 2, line 3, is 25 or more.

Enter the total wages paid for the tax year for each employee listed in column (a). But enter -0- for seasonal employees who worked 120 or fewer days during the tax year.

Wages, for this purpose, mean wages subject to social security and Medicare tax withholding determined without considering any wage base limit.

Worksheet 2. Information Needed To Complete Line 2 (FTEs)

Your credit is reduced if you had more than 10 full-time equivalent employees (FTEs) for the tax year. If you had 25 or more FTEs for the tax year, your credit is reduced to zero.

1. Enter the total employee hours of service from Worksheet 1, column (b) 1.  
2. Hours of service per FTE 2. 2,080
3. Full-time equivalent employees. Divide line 1 by line 2. If the result is not a whole number (0, 1, 2, etc.), generally round the result down to the next lowest whole number. For example, round 2.99 down to 2. However, if the result is less than one, enter 1. Report this number on Form 8941, line 2 3.  

Worksheet 3. Information Needed To Complete Line 3 (Average Annual Wages)

Your credit is reduced if you paid average annual wages of more than $25,000 for the tax year. If you paid average annual wages of $51,000 or more for the tax year, your credit is reduced to zero.

1. Enter the total employee wages paid from Worksheet 1, column (c) 1.  
2. Enter FTEs from Worksheet 2, line 3 2.  
3. Average annual wages. Divide line 1 by line 2. If the result is not a multiple of $1,000 ($1,000, $2,000, $3,000, etc.), round the result down to the next lowest multiple of $1,000. For example, round $2,999 down to $2,000. Report this amount on Form 8941, line 3 3.  

Worksheet 4. Information Needed To Complete Lines 4, 5, and 13 and Worksheet 7

If you need more rows, use a separate sheet and include the additional amounts in the totals below.

(a) 
Enrolled 
Individuals 
Considered 
Employees
(b) 
Employer 
Premiums 
Paid
(c) 
Adjusted 
Average 
Premiums
(d) 
Enrolled 
Employee 
Hours of 
Service
1.      
2.      
3.      
4.      
5.      
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8.      
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Totals:
     

Column (a), Enrolled Individuals Considered Employees

Enter the name or other identifying information for each individual listed in column (a) of Worksheet 1 who was enrolled in health insurance coverage you provided to employees during the tax year under a qualifying arrangement. For details, see Health Insurance Coverage and Qualifying Arrangement, earlier.

Column (b), Employer Premiums Paid

Enter the total employer premiums paid for the tax year for each employee listed in column (a). For details, see Employer Premiums Paid, earlier.

Column (c), Adjusted Average Premiums

Your credit is reduced if the employer premiums paid are more than the employer premiums that would have been paid if individuals considered employees were enrolled in a plan with a premium equal to the average premium for the small group market in the rating area in which the employee enrolls for coverage.

The rating area in which an employee enrolls for coverage is generally the rating area where your business is located (based on your primary business address). You will generally have selected a plan in your rating area that covers all employees located within or outside your rating area. However, if you have multiple businesses or operations in multiple states, and have set up plans in more than one SHOP Marketplace, the average premiums may be different for employees enrolled in each SHOP Marketplace.

Enter, for each employee listed in column (a), the premiums you would have paid if the employee had enrolled in a plan or plans with a total premium equal to the average premium for the small group market in the rating area in which the employee enrolls for coverage.

To find the average premium for the small group market in a rating area for tax years beginning in 2014, see the average premium tables at the end of these instructions. Family coverage includes any coverage other than employee-only coverage.

Example 4.

Assume the same facts that were used in Example 3. The $60 you contribute each payday toward employee health insurance coverage is 60% ($60 ÷ $100) of the weekly premium for each employee enrolled in employee-only coverage and 24% ($60 ÷ $250) of the weekly premium for each employee enrolled in family coverage.

In this situation, the total average premium limitation amounts that apply are 60% of the applicable average premium amounts for each employee enrolled in employee-only coverage and 24% of the applicable average premium amounts for each employee enrolled in family coverage.

You have an employee enrolled in employee-only coverage who enrolled for coverage in your local rating area. The applicable employee-only average premium amount for the rating area is $4,940 or $95 ($4,940 ÷ 52) for each weekly payday. The amount you would have paid toward this employee's health insurance coverage based on the average premiums is $57 (60% of $95) each payday.

To determine the premiums you would have paid for this employee during the tax year if the employee had enrolled in an average premium plan, multiply the number of pay periods during which your employee was enrolled in the health insurance coverage by $57. For example, you would have paid $2,964 ($57 × 52) if the employee was enrolled for the entire tax year. You would have paid $570 ($57 × 10) if the employee was only enrolled for 10 pay periods. You will need an additional set of calculations if the premium amounts changed during the tax year.

Column (d), Enrolled Employee Hours of Service

Do not complete column (d) of Worksheet 4 if Form 8941, line 12, is zero.

Enter the amount from column (b) of Worksheet 1 for each employee listed in column (a) of Worksheet 4.

Worksheet 5. Information Needed To Complete Line 8 (If Line 2 is More Than 10)

1. Enter the amount from Form 8941, line 7 1.  
2. Enter the number from Form 8941, line 2 2.      
3. Subtract 10 from line 2 3.      
4. Divide line 3 by 15. Enter the result as a decimal (rounded to at least 3 places) 4.      
5. Multiply line 1 by line 4 5.  
6. Subtract line 5 from line 1. Report this amount on Form 8941, line 8 6.  

Worksheet 6. Information Needed To Complete Line 9 (If Line 3 is More Than $25,000)

1. Enter the amount from Form 8941, line 8 1.  
2. Enter the amount from Form 8941, line 7 2.      
3. Enter the amount from Form 8941, line 3 3.      
4. Subtract $25,400 from line 3 4.      
5. Divide line 4 by $25,400. Enter the result as a decimal (rounded to at least 3 places) 5.      
6. Multiply line 2 by line 5 6.  
7. Subtract line 6 from line 1. Report this amount on Form 8941, line 9 7.  

Line 10

Enter the total amount of any state premium subsidies paid and any state tax credits available to you for premiums included on line 4. For details, see State Premium Subsidy and Tax Credit Limitation, earlier.

Worksheet 7. Information Needed To Complete Line 14 (If Line 12 is More Than Zero)

1. Enter the total enrolled employee hours of service from Worksheet 4, column (d) 1.  
2. Hours of service per FTE 2. 2,080
3. Divide line 1 by line 2. If the result is not a whole number (0, 1, 2, etc.), generally round the result down to the next lowest whole number. For example, round 2.99 down to 2. However, if the result is less than one, enter 1. Report this number on Form 8941, line 14 3.  

Line 15

Enter any credit for small employer health insurance premiums from:

  • Schedule K-1 (Form 1065), box 15 (code P);

  • Schedule K-1 (Form 1120S), box 13 (code P);

  • Schedule K-1 (Form 1041), box 13 (code G); and

  • Form 1099-PATR, Taxable Distributions Received From Cooperatives, box 10, or other notice of credit allocation.

Partnerships, S corporations, cooperatives, estates, trusts, and tax-exempt eligible small employers must always report the above credits on line 15. All other filers figuring a separate credit on earlier lines must also report the above credits on line 15. All others not using earlier lines to figure a separate credit must report the above credits directly on Form 3800, Part lll, line 4h.

Line 17

Cooperatives.   A cooperative described in section 1381(a) must allocate to its patrons the credit in excess of its tax liability. Therefore, to figure the unused amount of the credit allocated to patrons, the cooperative must first figure its tax liability. While any excess is allocated to patrons, any credit recapture applies as if the cooperative had claimed the entire credit.

  If the cooperative is subject to the passive activity rules, include on line 15 any credit for small employer health insurance premiums from passive activities disallowed for prior years and carried forward to this year. Complete Form 8810, Corporate Passive Activity Loss and Credit Limitations, to determine the allowed credit that must be allocated to patrons. For details, see the Instructions for Form 8810.

Estates and trusts.   Allocate the credit on line 16 between the estate or trust and the beneficiaries in the same proportion as income was allocated and enter the beneficiaries' share on line 17.

  If the estate or trust is subject to the passive activity rules, include on line 15 any credit for small employer health insurance premiums from passive activities disallowed for prior years and carried forward to this year. Complete Form 8582-CR, Passive Activity Credit Limitations, to determine the allowed credit that must be allocated between the estate or trust and the beneficiaries. For details, see the Instructions for Form 8582-CR.

Line 19

Enter the total amount of certain payroll taxes. Payroll taxes, for this purpose, mean only the following taxes.

  • Federal income taxes the tax-exempt employer was required to withhold from employees' wages in calendar year 2014.

  • Medicare taxes the tax-exempt employer was required to withhold from employees' wages in calendar year 2014.

  • Medicare taxes the tax-exempt employer was required to pay for calendar year 2014.


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