Specific Instructions

If your only source for this credit is a partnership, S corporation, cooperative, estate, or trust, skip lines 1 through 14 of the form and report the credit you received from these sources on:

  • Line 15 if you are one of these entities, or

  • Form 3800, line 4h, if you are not one of these entities.

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 1a, 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.

Worksheet 1. Information Needed To Complete Line 1a 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
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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.

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.   Seasonal employees who work 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 $50,000 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) 
Employer 
State 
Average 
Premiums
(d) 
Enrolled 
Employee 
Hours of 
Service
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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), Employer State 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 state in which the employee works.

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 state in which the employee works.

The following table lists the average premium for the small group market in each state for tax years beginning in 2013. Family coverage includes any coverage other than single (employee-only) coverage.

Table A. 2013 State Average Premiums for Small Group Markets

State Single (Employee-Only) Coverage Family 
Coverage
Alabama $5,363 $13,185
Alaska 7,961 16,808
Arizona 4,946 12,006
Arkansas 4,546 10,575
California 5,345 12,809
Colorado 5,445 13,937
Connecticut 6,307 16,011
Delaware 6,555 15,144
District of Columbia 6,133 16,079
Florida 5,602 13,261
Georgia 5,605 12,369
Hawaii 5,246 12,782
Idaho 4,901 10,738
Illinois 6,017 14,453
Indiana 5,710 13,029
Iowa 4,963 12,071
Kansas 5,164 12,322
Kentucky 4,936 11,981
Louisiana 5,390 12,691
Maine 5,590 13,064
Maryland 5,610 13,965
Massachusetts 6,323 16,502
Michigan 5,569 13,256
Minnesota 5,588 14,077
Mississippi 5,042 11,964
Missouri 5,268 12,366
Montana 5,433 11,739
Nebraska 5,463 13,270
Nevada 5,417 12,125
New Hampshire 6,153 15,367
New Jersey 6,250 15,225
New Mexico 5,639 13,121
New York 6,242 15,478
North Carolina 5,510 12,541
North Dakota 5,073 12,343
Ohio 5,174 12,710
Oklahoma 5,142 11,995
Oregon 5,413 12,811
Pennsylvania 5,618 13,753
Rhode Island 6,345 15,363
South Carolina 5,351 12,473
South Dakota 5,364 12,750
Tennessee 5,251 11,663
Texas 5,327 13,313
Utah 4,951 12,619
Vermont 5,800 13,409
Virginia 5,449 13,241
Washington 5,292 12,196
West Virginia 5,947 13,734
Wisconsin 5,786 14,623
Wyoming 5,948 14,314

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 single (employee-only) coverage and 25.21% ($60 ÷ $238) 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 amounts shown in the single coverage column of Table A for each employee enrolled in single coverage and 25.21% of the applicable amounts shown in the family coverage column of Table A for each employee enrolled in family coverage.

You have an employee enrolled in single (employee-only) coverage who works for you in Maryland. The single coverage amount shown in Table A for Maryland is $5,610 or $107.88 ($5,610 ÷ 52) for each weekly payday. The amount you are considered to have paid toward this employee's health insurance coverage based on the average premiums in Table A is $64.73 (60% of $107.88) each payday.

To determine the premiums you would have paid for this employee during the tax year if the employee had enrolled in a state-average-premium plan, multiply the number of pay periods during which your employee was enrolled in the health insurance coverage by $64.73. For example, you would have paid $3,365.96 ($64.73 × 52) if the employee was enrolled for the entire tax year. You would have paid $647.30 ($64.73 × 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 Worksheet 4 column (d) 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 $25,000 from line 3 4.      
5. Divide line 4 by $25,000. 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

  • Any notice of credit allocation you receive from a cooperative.

Taxpayers other than partnerships, S corporations, cooperatives, estates, and trusts, whose only source of this credit is from those pass-through entities, are not required to complete line 15. Instead, they can report this credit directly on Form 3800, 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 2013.

  • Medicare taxes the tax-exempt employer was required to withhold from employees' wages in calendar year 2013.

  • Medicare taxes the tax-exempt employer was required to pay for calendar year 2013.


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