The IRS on Monday (Oct. 6) noted the impact of sequestration cuts on a small business health care tax incentive. The ACA offers the credit for SMBs to enroll in insurance exchange health plans.
According to the IRS: “Due to sequestration, refund payments issued to certain small tax-exempt employers claiming the refundable portion of the Small Business Health Care Tax Credit under Internal Revenue Code section 45R, are subject to sequestration. This means that refund payments processed on or after Oct. 1, 2014, and on or before Sept. 30, 2015, issued to a tax-exempt taxpayer claiming the Small Business Health Care Tax Credit under section 45R will be reduced by the fiscal year 2015 sequestration rate of 7.3 percent (regardless of when the original or amended tax return was received by the IRS).”
The IRS further said in its statement that these rules would apply unless changed by statute.
“The sequestration reduction rate will be applied unless and until a law is enacted that cancels or otherwise impacts the sequester, at which time the sequestration reduction rate is subject to change. Sequestration only affects the refundable portion of the Small Business Health Care Tax Credit filed by tax-exempt employers.”
The IRS further explained that the change only effects a limited pool of SMBs.
“Sequestration does not impact Small Business Health Care Tax Credit claims by non-tax-exempt employers, as the credit is not a refundable credit for non-tax-exempt employers.”