IRS Issues Guidance for Small Businesses about Valuable Credit

Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

IRS Tax Tip 2018-71, May 8, 2018

The IRS reminds employers about the Small Business Health Care Tax Credit, which can benefit certain small employers who provide health coverage to employees. Also, the IRS notes that it recently issued guidance that provides relief for certain small employers wishing to claim the Small Business Health Care Tax Credit for 2017 and later years but who are unable to do so because of unavailability of coverage in the Small Business Health Options Marketplace. Notice 2018-27 PDF gives guidance about calculating the credit under these circumstances.

Generally, to qualify for the credit, small employers must provide employees a qualified health plan from a SHOP Marketplace. Also, small employers may only claim the credit for two consecutive tax years.

In general, the recently provided relief helps employers who first claim the credit for all or part of 2016 or a later tax year for coverage offered through a SHOP Marketplace, but who can’t offer SHOP Marketplace coverage to employees for all or part of the remainder of the credit period because there aren’t any SHOP Marketplace plans available where the employer is located.

Under the relief, the employer can claim the credit for health insurance coverage provided outside of a SHOP Marketplace for the remainder of the credit period if that coverage would have qualified under the rules that applied before January 1, 2014. 

The notice does not affect previous transition relief for the credit that was separately provided for 2014, 2015 and 2016.

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