Form 8941 - Credit for Small Employer Health Insurance Premiums

2010

Instructions for Form 8941

Department of the Treasury
Internal Revenue Service

Credit for Small Employer Health Insurance Premiums
Section references are to the Internal Revenue Code unless
otherwise noted.

General Instructions
Purpose of Form
Eligible small employers (defined below) use Form 8941
to figure the credit for small employer health insurance
premiums for tax years beginning after 2009. The
maximum credit is a percentage of premiums the
employer paid during the tax year for certain health
insurance coverage the employer provided to certain
employees. But the credit may be reduced by limitations
based on the employer’s full-time equivalent employees,
average annual wages, state average premiums, and
state premium subsidies and tax credits.
For tax-exempt small employers, the credit is
generally 25% of premiums paid, is also limited to the
amount of certain payroll taxes paid, and is claimed as a
refundable credit on Form 990-T, Exempt Organization
Business Income Tax Return. A tax-exempt small
employer is an eligible small employer described in
section 501(c) that is exempt from taxation under section
501(a). A tax-exempt employer not described in section
501(c) is generally not eligible to claim this credit.
However, a tax-exempt farmers’ cooperative subject to
tax under section 1381 may be able to claim the credit as
a general business credit as discussed next.
For all other small employers, the credit is generally
35% of premiums paid, can be taken against both regular
and alternative minimum tax, and is claimed as part of
the general business credit on Form 3800, General
Business Credit.
If your only source for this credit is a partnership,
TIP S corporation, cooperative, estate, or trust, see
the Tip under Specific Instructions on page 5.

Eligible Small Employers
You are an eligible small employer for the tax year if you
meet the following three requirements.
1. You paid premiums for employee health insurance
coverage under a qualifying arrangement. A
qualifying arrangement is generally an arrangement that
requires you to pay a uniform percentage (not less than
50%) of the premium cost for each enrolled employee’s
health insurance coverage (defined on page 3). However,
for a tax year beginning in 2010 only, a qualifying
arrangement includes any arrangement that requires you
to pay at least 50% of the premium cost for single
(employee-only) coverage for each employee enrolled in
any health insurance coverage you provide to
employees, whether or not you pay a uniform percentage
of the health care premium cost for each enrolled
employee.
In addition, certain employers who do not satisfy the
2010 transition rule discussed above (because they
contribute less than 50% of the employee-only premium
for some enrolled employees) may still qualify for the

credit under other rules for qualifying arrangements. This
may include, for example, employers who offer more than
one type of health insurance coverage or whose
insurance provider does not charge the same premium
for all employees enrolled in single (employee-only)
coverage. For details, see Notice 2010-82 as discussed
under More Information on page 5.
For more details, see Employer Premiums Paid,
Health Insurance Coverage, and Qualifying Arrangement,
later.
2. You had fewer than 25 full-time equivalent
employees (FTEs) for the tax year. You may be able
to meet this requirement even if you had 25 or more
employees. For details, see Individuals Considered
Employees and FTE Limitation, later.
3. You paid average annual wages for the tax year of
less than $50,000 per FTE. For details, see Individuals
Considered Employees and Average Annual Wage
Limitation, later.
If you had more than 10 FTEs and average
annual wages of more than $25,000, the FTE and
CAUTION average annual wage limitations (discussed later)
will separately reduce your credit. This may reduce your
credit to zero even if you had fewer than 25 FTEs and
average annual wages of less than $50,000.
Employers treated as a single employer. Treat the
following employers as a single employer to figure the
credit.
• Employers who are corporations in a controlled group
of corporations.
• Employers who are members of an affiliated service
group.
• Employers who are partnerships, proprietorships, etc.,
under common control. See Regulations sections
1.414(c)-2, 1.414(c)-3, and 1.414(c)-4 for details.
• Tax-exempt employers under common control. See
Regulations section 1.414(c)-5.
For details, see section 45R(e)(5)(A).

!

No more than one Form 8941 can be filed with a
TIP tax return, unless the exception described in
Example 2 below applies.
Example 1. You are a sole proprietor with two
separate businesses and you file a separate Schedule C
(Form 1040) for each business. You must treat both
businesses as a single employer to figure the credit. You
will file one Form 8941 for both businesses.
Example 2. You and your spouse are both sole
proprietors and file a separate Schedule C (Form 1040)
for each of your separate businesses. Neither spouse
was an employee of the other spouse or participated in
the management of the other spouse’s business at any
time during the tax year. No more than 50% of the gross
income of either business was derived from royalties,
rents, dividends, interest, and annuities and you
otherwise meet the requirements listed in Regulations
section 1.414(c)-4(b)(5)(ii). Do not treat both businesses
as a single employer to figure the credit. If you and your

Cat. No. 55222U

spouse are both eligible small employers, you can file
two Forms 8941 with a jointly filed Form 1040.

for determining worker status. Self-employed ministers
are not considered employees.

Individuals Considered Employees

FTE Limitation

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.
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

Your credit is reduced if you had more than 10 FTEs for
the tax year. If you had 25 or more FTEs for the tax year,
your credit is reduced to zero. However, you can still
receive a credit from a partnership, S corporation,
cooperative, estate, or trust (see the instructions for line
15 on page 8).
How to figure FTEs. To figure the number of FTEs you
had for the tax year, you must do the following.
1. Figure the total hours of service (discussed below)
for the tax year of all individuals considered employees.
2. Divide the total hours of service by 2,080.
3. 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, 10.99 is rounded down to 10.
However, if the result is less than one, round up to 1.
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 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).
Do not include hours of service of any seasonal
employee who worked 120 or fewer days during the tax
year. Also, do not include more than 2,080 hours of
service from any employee.
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.

Average Annual Wage Limitation
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. However, you can
still receive a credit from a partnership, S corporation,
cooperative, estate, or trust (see the instructions for line
15 on page 8).
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How to figure average annual wages. To figure the
average annual wages you paid for the tax year, you
must do the following.
1. Figure the total wages paid (discussed below) for
the tax year to all individuals considered employees.
2. Divide the total wages paid by the number of FTEs
you had for the tax year (discussed earlier).
3. 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, $25,999 is
rounded down to $25,000.

will need an additional set of calculations if the premium
amounts changed during the tax year.

Health Insurance Coverage
For credit purposes, health insurance coverage means
benefits consisting of medical care (provided directly,
through insurance or reimbursement, or otherwise) under
any hospital or medical service policy or certificate,
hospital or medical service plan contract, or health
maintenance organization contract offered by a health
insurance provider.
A health insurance provider is either an insurance
company or another entity licensed under state law to
provide health insurance coverage.
Health insurance coverage also includes coverage
under the following plans.
• Limited scope dental or vision plans.
• Long-term care plans.
• Nursing home care plans.
• Home health care plans.
• Community-based care plans.
• Any combination of the above.
In addition, health insurance coverage includes the
following.
• Coverage only for a specified disease or illness.
• Hospital indemnity or other fixed indemnity insurance.
• Medicare supplemental health insurance.
• Certain other supplemental coverage.
• Similar supplemental coverage provided to coverage
under a group health plan.

Employee wages paid. Wages, for this purpose, mean
wages subject to social security and Medicare tax
withholding determined without considering any wage
base limit. But do not include wages paid to any seasonal
employees who worked 120 or fewer days during the tax
year.

Employer Premiums Paid
Only premiums you paid for health insurance coverage
under a qualifying arrangement (discussed later) for
individuals considered employees are counted when
figuring your credit. For this purpose, if you are entitled to
a state tax credit or a state premium subsidy paid directly
to you for premiums you paid, do not reduce the amount
you paid by the credit or subsidy amount. Also, if a state
pays a premium subsidy directly to your insurance
provider, treat the subsidy amount as an amount you
paid for employee health insurance coverage.
If you pay only a portion of the premiums and your
employees pay the rest, only the portion you pay is taken
into account. For this purpose, any premium paid through
a salary reduction arrangement under a section 125
cafeteria plan is not treated as an employer paid
premium. For more information on cafeteria plans, see
section 1 of Publication 15-B, Employer’s Tax Guide to
Fringe Benefits.
Example 3. You offer health insurance coverage to
employees under a qualifying arrangement that requires
you to pay 60% of the premium cost for single
(employee-only) coverage for each employee enrolled in
any health insurance coverage you provide to
employees. The total premium for each employee
enrolled in single (employee-only) coverage is $5,200 per
year or $100 ($5,200 ÷ 52) for each weekly payday. The
total premium for each employee enrolled in family
coverage is $12,376 per year or $238 ($12,376 ÷ 52) for
each weekly payday.

Employer premiums paid for health insurance
coverage can be counted in figuring the credit
CAUTION only if the premiums are paid under a qualifying
arrangement.
Health insurance coverage does not include the
following benefits.
• Coverage only for accident, or disability income
insurance, or any combination thereof.
• Coverage issued as a supplement to liability insurance.
• Liability insurance, including general liability insurance
and automobile liability insurance.
• Workers’ compensation or similar insurance.
• Automobile medical payment insurance.
• Credit-only insurance.
• Coverage for on-site medical clinics.
• Other similar insurance coverage, specified in
regulations, under which benefits for medical care are
secondary or incidental to other insurance benefits.
Also, because the coverage must be offered by a
health insurance provider as discussed above, health
insurance coverage does not include benefits provided
by the following.
• Health reimbursement arrangements (HRAs).
• Flexible spending arrangements (health FSAs).
• Coverage under other self-insured plans.
• Health savings accounts (HSAs).
However, health insurance coverage may include
coverage under the following plans.
• Church welfare benefit plans.
• Multiemployer health and welfare plans that provide
coverage through a health insurance provider.
For details, see Notice 2010-82 as discussed under More
Information on page 5.

!

Each payday you contribute $60 (60% of $100) toward
the premium cost of each employee enrolled in single
(employee-only) coverage and withhold the remaining
$40 from the employee’s paycheck to obtain the $100
total weekly premium. Each payday you contribute $60
(the same amount you pay toward the premiums of
employees enrolled in single coverage) toward the
premium cost of each employee enrolled in family
coverage and withhold the remaining $178 from the
employee’s paycheck to obtain the $238 total weekly
premium.
To determine the premiums you paid during the tax
year, multiply the number of pay periods during which the
employee was enrolled in the health insurance coverage
by $60. For example, you would have paid $3,120 ($60 ×
52) for an employee who was enrolled for the entire tax
year. You would have paid $600 ($60 × 10) for an
employee who was only enrolled for 10 pay periods. You

Qualifying Arrangement
For a tax year beginning in 2010 only, a qualifying
arrangement includes any arrangement that requires you
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to pay at least 50% of the premium cost for single
(employee-only) coverage for each employee enrolled in
any health insurance coverage you provide to
employees, even if these contributions do not represent
the same percentage of the premium for all of these
employees. If an employee receives more expensive
coverage (such as family coverage), it is still a qualifying
arrangement if the employer pays at least 50% of the
premium for single coverage even if that is less than 50%
of the actual premium for the employee.
In addition, certain employers who do not satisfy the
above rule (because they contribute less than 50% of the
employee-only premium for some enrolled employees)
may still qualify for the credit under other rules for
qualifying arrangements. This may include, for example,
employers who offer more than one type of health
insurance coverage or whose insurance provider does
not charge the same premium for all employees enrolled
in single (employee-only) coverage. For details, see
Notice 2010-82 as discussed under More Information on
page 5.
Different types of health insurance plans are generally
not aggregated for purposes of meeting the qualifying
arrangement requirement. For example, if you offer a
major medical insurance plan and a stand-alone vision
plan, you generally must separately satisfy the
requirements for a qualifying arrangement with respect to
each type of coverage.
For this purpose, if you are entitled to a state tax credit
or a state premium subsidy paid directly to you for
premiums you paid, do not reduce the amount you paid
by the credit or subsidy amount. Also, if a state pays a
premium subsidy directly to your insurance provider, treat
the subsidy amount as an amount you paid for employee
health insurance coverage.
For a special rule that applies to multiemployer health
and welfare plans, see Notice 2010-82 as discussed
under More Information on page 5.

Single
(Employee-Only)
Coverage

Family
Coverage

Delaware

5,602

12,513

District of Columbia

5,355

12,823

Florida

5,161

12,453

Georgia

4,612

10,598

Hawaii

4,228

10,508

Idaho

4,215

9,365

Illinois

5,198

12,309

Indiana

4,775

11,222

Iowa

4,652

10,503

Kansas

4,603

11,462

Kentucky

4,287

10,434

Louisiana

4,829

11,074

Maine

5,215

11,887

Maryland

4,837

11,939

Massachusetts

5,700

14,138

Michigan

5,098

12,364

Minnesota

4,704

11,938

Mississippi

4,533

10,501

Missouri

4,663

10,681

Montana

4,772

10,212

Nebraska

4,715

11,169

Nevada

4,553

10,297

New Hampshire

5,519

13,624

New Jersey

5,607

13,521

New Mexico

4,754

11,404

New York

5,442

12,867

North Carolina

4,920

11,583

North Dakota

4,469

10,506

Ohio

4,667

11,293

Oklahoma

4,838

11,002

Oregon

4,681

10,890

Pennsylvania

5,039

12,471

Rhode Island

5,887

13,786

South Carolina

4,899

11,780

South Dakota

4,497

11,483

Tennessee

4,611

10,369

State

State Average Premium Limitation
Your credit is reduced if the employer premiums paid are
more than the employer premiums that would have been
paid if individuals considered employees 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. The following table lists the average
premium for the small group market in each state for tax
years beginning in 2010. Family coverage includes any
coverage other than single (employee-only) coverage.

Table A. State Average Premiums for Small
Group Markets
Single
(Employee-Only)
Coverage

Family
Coverage

Texas

5,140

11,972

Alabama

$4,441

$11,275

Utah

4,238

10,935

Alaska

6,204

13,723

Vermont

5,244

11,748

Arizona

4,495

10,239

Virginia

4,890

11,338

Arkansas

4,329

9,677

Washington

4,543

10,725

California

4,628

10,957

West Virginia

4,986

11,611

Colorado

4,972

11,437

Wisconsin

5,222

12,819

Connecticut

5,419

13,484

Wyoming

5,266

12,163

State

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• Medicare taxes the tax-exempt employer was required

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.

to withhold from employees’ wages in calendar year
2010.
• Medicare taxes the tax-exempt employer was required
to pay for calendar year 2010.

Premium Deduction Reduced
Your deduction for the cost of providing health insurance
coverage to your employees is reduced by the amount of
any credit for small employer health insurance premiums
allowed with respect to the 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.

More Information
For more information about this credit, see the following.
• Section 45R.
• Notice 2010-44, 2010-22 I.R.B. 717, available at www.
irs.gov/irb/2010-22_IRB/ar12.html.
• Notice 2010-82 available in Internal Revenue Bulletin
2010-51 at www.irs.gov/irb and at http://www.irs.gov/pub/
irs-drop/n-10-82.pdf.
• IRS.gov.

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 $4,837 or $93 ($4,837 ÷ 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 $55.80
(60% of $93) each payday.

Specific Instructions

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 $55.80. For
example, you would have paid $2,901.60 ($55.80 × 52) if
the employee was enrolled for the entire tax year. You
would have paid $558 ($55.80 × 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.

If your only source for this credit is a partnership,
TIP 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.
Worksheets 1 through 7 can help you 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 through 3 of Form 8941.
• Use Worksheet 4 to figure the amounts to report on
lines 4 and 5 of Form 8941.
• Use Worksheets 5, 6, and 7 if you need to figure
amounts to report on lines 8, 9, and 14 of Form 8941.

State Premium Subsidy and Tax Credit
Limitation
Your credit may be reduced if you are entitled to a state
tax credit or a state premium subsidy for the cost of
health insurance coverage you provide under a qualifying
arrangement to individuals considered employees. The
state tax credit may be refundable or nonrefundable and
the state premium subsidy may be paid to you or directly
to your insurance provider.

Line 1

Although a state tax credit or premium subsidy paid
directly to you does not reduce the amount of your
employer premiums paid, and although a state premium
subsidy paid directly to an insurance provider is treated
as an employer premium you paid, the amount of your
credit cannot be more than your net premium payments.
Net premium payments are employer premiums paid
(discussed earlier) minus the amount of any state tax
credits you received or will receive and any state
premium subsides paid either to you or directly to your
insurance provider for premiums for health insurance
coverage you provide under a qualifying arrangement to
individuals considered employees.

Column (a). Enter the name or other identifying
information for all individuals considered employees for
purposes of this credit. For details, see Individuals
Considered Employees on page 2.
Column (b). 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 -0for seasonal employees who worked 120 or fewer days
during the tax year. The information in this column is
used to figure your number of full-time equivalent
employees on Worksheet 2. For details, see FTE
Limitation on page 2.

Enter the total number of individuals considered
employees shown in column (a) of Worksheet 1. For
details, see Individuals Considered Employees on page
2.

Instructions for Worksheet 1

Payroll Tax Limitation for Tax-Exempt Small
Employers

!

CAUTION

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

Column (c). 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. The information in this column is
used to figure your average annual wages on Worksheet
3. For details, see Average Annual Wage Limitation on
page 2.

The credit for tax-exempt small employers cannot exceed
the amount of certain payroll taxes. For tax years
beginning in 2010, 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 2010.
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Worksheet 1. Information Needed To Complete
Line 1 and Worksheets 2 and 3

Worksheet 2. Full-Time Equivalent Employees
(FTEs)

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

1. Enter the total employee hours of service
from Worksheet 1, column (b) . . . . . . . . 1.

(c)
Employee
Wages
Paid

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. However, if the result is
less than one, enter 1. Report this
amount on Form 8941, line 2 . . . . . . . . . 3.

1.
2.
3.
4.

Line 3

5.

Enter the average annual wages shown on line 3 of
Worksheet 3. For details, see Average Annual Wage
Limitation on page 2.

6.
7.

Worksheet 3. Average Annual Wages

8.
9.
10.

1. Enter the total employee wages paid
from Worksheet 1, column (c) . . . . . . . . 1.

11.

2. Enter FTEs from Worksheet 2, line 3 . . . 2.

12.

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. Report this amount
on Form 8941, line 3 . . . . . . . . . . . . . . 3.

13.
14.
15.
16.

Line 4

17.
19.

Enter the total employer premiums paid shown in column
(b) of Worksheet 4. For details, see Employer Premiums
Paid on page 3.

20.

Line 5

21.
22.

Enter the total employer-state-average premiums shown
in column (c) of Worksheet 4. For details, see State
Average Premium Limitation on page 4.

23.

Instructions for Worksheet 4

24.

Column (a). 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 on
page 3.
Column (b). Enter the total employer premiums paid for
the tax year for each employee listed in column (a). For
details, see Employer Premiums Paid on page 3.
Column (c). 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. For details, see State
Average Premium Limitation on page 4.

18.

25.

Totals:

Line 2
Enter the number of full-time equivalent employees
shown on line 3 of Worksheet 2. For details, see FTE
Limitation on page 2.

!

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

CAUTION

Column (d). Enter the amount from column (b) of
Worksheet 1 for each employee listed in column (a) of
Worksheet 4.
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Worksheet 4. Information Needed To Complete
Lines 4 and 5 and Worksheet 7

Worksheet 5. FTE Limitation
1. Enter the amount from Form 8941, line 7 . . 1.

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

2. Enter the amount from Form
8941, line 2 . . . . . . . . . . . . . . 2.

(d)
Enrolled
Employee
Hours of
Service

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.

1.

6. Subtract line 5 from line 1. Report this
amount on Form 8941, line 8 . . . . . . . . . . . 6.

2.
3.
4.

Line 9

5.

If the average annual wages reported on line 3 are
$25,000 or less, your credit is not reduced by the
average annual wage limitation. Enter on line 9 the
amount from line 8. If line 3 is more than $25,000, enter
on line 9 the reduced credit amount shown on Worksheet
6, line 7.

6.
7.
8.
9.

Worksheet 6. Average Annual Wage Limitation

10.
11.

1. Enter the amount from Form 8941, line 8 . . . 1.

12.

2. Enter the amount from Form
8941, line 7 . . . . . . . . . . . . . . . . 2.

13.
14.

3. Enter the amount from Form
8941, line 3 . . . . . . . . . . . . . . . . 3.

15.

4. Subtract $25,000 from line 3 . . . . 4.

16.
17.

5. Divide line 4 by $25,000. Enter
the result as a decimal (rounded
to at least 3 places) . . . . . . . . . . 5.

18.

6. Multiply line 2 by line 5 . . . . . . . . . . . . . . . . 6.

19.

7. Subtract line 6 from line 1. Report this
amount on Form 8941, line 9 . . . . . . . . . . . 7.

20.
21.

Line 10

22.
24.

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 on page 5.

25.

Line 13

Totals:

Enter the total number of individuals shown in column (a)
of Worksheet 4. These are individuals considered
employees for whom you paid premiums during the tax
year for health insurance coverage under a qualifying
arrangement.

23.

Line 8

Line 14

If the number of FTEs reported on line 2 is 10 or less,
your credit is not reduced by the FTE limitation. Enter on
line 8 the amount from line 7. If line 2 is more than 10,
enter on line 8 the reduced credit amount shown on
Worksheet 5, line 6.

Enter the number of full-time equivalent employees
(FTEs) shown on line 3 of Worksheet 7. These are FTEs
for whom you paid premiums for health insurance
coverage under a qualifying arrangement during the tax
year.

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Worksheet 7. FTEs Enrolled in Coverage

Line 19
Enter the passive activity credit for small employer health
insurance premiums allowed for 2010 from Form
8582-CR or Form 8810.

1. Enter the total enrolled employee hours of
service from Worksheet 4, column (d) . . 1.
2. Hours of service per FTE . . . . . . . . . . . 2.

2,080

Line 20

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. However, if the result is
less than one, enter 1. Report this amount
on Form 8941, line 14 . . . . . . . . . . . . . . 3.

Use line 20 to show any carryback if you amend your
2010 return to carry back an unused credit for small
employer health insurance premiums from 2011.

Line 22
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.
Estates and Trusts. Allocate the credit on line 21
between the estate or trust and the beneficiaries in the
same proportion as income was allocated and enter the
beneficiaries’ share on line 22.

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.

Line 24

Line 17

Enter the total amount of certain payroll taxes. Payroll
taxes, for this purpose, means only the following taxes.
• Federal income taxes the tax-exempt employer was
required to withhold from employees’ wages in calendar
year 2010.
• Medicare taxes the tax-exempt employer was required
to withhold from employees’ wages in calendar year
2010.
• Medicare taxes the tax-exempt employer was required
to pay for calendar year 2010.

Enter the amount included on line 16 that is from a
passive activity. Generally, a passive activity is a trade or
business in which you did not materially participate.
Rental activities are generally considered passive
activities, whether or not you materially participate. For
details, see Form 8582-CR, Passive Activity Credit
Limitations (for individuals, trusts, and estates), or Form
8810, Corporate Passive Activity Loss and Credit
Limitations (for corporations).

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of
the United States. You are required to give us the information. We need it to ensure that you are complying with these
laws and to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be
retained as long as their contents may become material in the administration of any Internal Revenue law. Generally,
tax returns and return information are confidential, as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated
burden for individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the
estimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers
who file this form is shown below.
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Learning about the law or the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preparing and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12 hr., 46 min.
1 hr., 23 min.
2 hr., 48 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler,
we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

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