Form 8941 - Credit for Small Employer Health Insurance Premiums

Page 5 of 8 Instructions for Form 8941

14:03 - 18-OCT-2010

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Note. Do not complete Worksheet 1, column (c), if
Worksheet 2, line 3, is 25 or more.

Payroll Tax Limitation
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, 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.

Worksheet 1. Information Needed To
Complete Line 1 and Worksheets 2 and 3
(a)
Individuals
Considered
Employees

(b)
Employee
Hours of
Service

(c)
Employee
Wages
Paid

1.
2.

Premium Deduction Reduced

3.

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. For details, see
section 280C(h).

4.
5.
6.
7.

Additional Information

8.

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-xx, 2010–xx I.R.B. xxx, available at www.
irs.gov/irb/2010-xx_IRB/ar12.html).
• IRS.gov.

9.
10.
11.
12.
13.
14.

Specific Instructions
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.

15.

Line 1

21.

16.
17.
18.
19.
20.

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

22.
23.
24.

Instructions for Worksheet 1

25.

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 1.
Column (b). Enter the total hours of service for the tax
year for all employees 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.
Column (c). Enter the total wages paid for the tax year
for all employees 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 3.

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

Total number of
employees:

Total employee Total employee
hours of service: wages paid:

______________

______________ ______________

Line 2
Enter on line 2 the number of full-time equivalent
employees shown on line 3 of Worksheet 2. For details,
see FTE Limitation on page 2.
Note. Complete Worksheet 1, columns (a) and (b),
before completing Worksheet 2.

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Page 6 of 8 Instructions for Form 8941

14:03 - 18-OCT-2010

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Worksheet 1 who were enrolled in health insurance
coverage you provided to employees during the tax year
under a qualifying arrangement. For details, see
Qualifying Arrangement and Health Insurance Coverage
on page 3.
Column (b). Enter the total employer premiums paid for
the tax year for all employees listed in column (a). For
details, see Employer Premiums Paid on page 3.
Column (c). Enter the total premiums paid for the tax
year for all employees listed in column (a). Include both
employee and employer paid premiums.
Column (d). Divide column (b) by column (c) (round to
at least 3 places). Use the result to verify that you paid a
uniform percentage of each employees premium during
the tax year. The percentage for employees who were
enrolled in single coverage must be at least 50% (.5).
The percentage for employees who were enrolled in
family coverage may be more or less than 50% as long
as you paid an amount that was no less than the amount
you paid for employees who were enrolled in single
coverage. For details, see Eligible Small Employers on
page 1.
Column (e). If the employee listed in column (a) was
enrolled in the health insurance plan for the entire tax
year, enter the amount from column (c) in column (e). If
the employee was not enrolled in the health insurance
coverage for the entire tax year, enter the amount of total
premiums that would have been paid during the tax year
if the employee had been enrolled in the health insurance
coverage for the entire tax year.
Column (f). Divide Column (c) by Column (e) (round to
at least 3 places).
Column (h). Enter the amount shown in Table A (see
page 4) for the state in which the employee works for all
employees listed in column (a). Enter the amount from
the single (employee-only) coverage column if the
employee was enrolled in single (employee-only)
coverage. Enter the amount from the family coverage
column if the employee was enrolled in any coverage
other than single (employee-only) coverage. For details,
see Average Premium Limitation on page 4.
Column (j). Enter the amount from column (b) of
Worksheet 1 for all employees listed in column (a).
Note. Do not complete Worksheet 4, column (j), if Form
8941, line 12 is zero.

Worksheet 2. Full-Time Equivalent
Employees (FTEs)
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. However, if the
result is less than one, enter 1. Report this
amount on Form 8941, line 2 . . . . . . . . . . . . . 3.

Line 3
Enter on line 3 the average annual wages shown on line
3 of Worksheet 3. For details, see Average Annual Wage
Limitation on page 3.
Note. Complete Worksheets 1 and 2 before completing
Worksheet 3. Do not complete Worksheet 3 if Worksheet
2, line 3, is 25 or more.

Worksheet 3. Average Annual Wages
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.
Report this amount on Form 8941, line 3 . . . . 3.

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

Line 5
Enter on line 5 the amount shown in column (i) of
Worksheet 4. For details, see Average Premium
Limitation on page 4.

Instructions for Worksheet 4
Column (a). Enter the name or other identifying
information for all individuals listed in column (a) of

Worksheet 4. Information Needed To Complete Lines 4 and 5 and Worksheet 7
(a)
Enrolled
Individuals
Considered
Employees

(b)
Employer
Premiums
Paid

(c)
Total
Premiums
Paid

(d)
Divide
Column
(b) by
Column
(c)

(e)
Annualized
Total
Premiums

1.
2.
3.
4.
5.
6.

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(f)
Divide
Column
(c) by
Column
(e)

(g)
Multiply
Column
(d) and
Column
(f)

(h)
Average
Annual
Premiums
(Table A)

(i)
Multiply
Column
(g) and
Column
(h)

(j)
Enrolled
Employee
Hours of
Service

Page 7 of 8 Instructions for Form 8941

14:03 - 18-OCT-2010

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

(i)
Multiply
Column
(g) and
Column
(h)

(j)
Enrolled
Employee
Hours of
Service

Total number
of enrolled
employees:

Total
employer
premiums
paid:

Total:

Total
enrolled
employee
hours of
service:

________

________

________

________

(a)
Enrolled
Individuals
Considered
Employees

(b)
Employer
Premiums
Paid

(c)
Total
Premiums
Paid

(d)
Divide
Column
(b) by
Column
(c)

(e)
Annualized
Total
Premiums

(f)
Divide
Column
(c) by
Column
(e)

(g)
Multiply
Column
(d) and
Column
(f)

(h)
Average
Annual
Premiums
(Table A)

7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
If you need more rows, use a separate sheet of paper and include the additional amounts in the totals below.

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 5.

Line 8
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 5.

Worksheet 6. Average Annual Wage
Limitation

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

1. Enter the amount from Form 8941, line 7 . . . . . .
2. Subtract $25,000 from the amount on Form 8941,
line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Divide line 2 by $25,000. Enter the result as a
decimal (rounded to at least 3 places) . . . . . . . .
4. Multiply line 1 by line 3 . . . . . . . . . . . . . . . . . . .
5. Subtract line 4 from Form 8941, line 8. Report this
amount on Form 8941, line 9 . . . . . . . . . . . . . .

1.
2.
3.
4.
5.

1.
2.
3.
4.
5.

Line 9

Line 10

If the average annual wages reported on line 3 are
$25,000 or less, your credit is not reduced by the

Enter the total amount of any state premium subsidies
paid and any state tax credits available to you for
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Page 8 of 8 Instructions for Form 8941

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

premiums included on line 4. For details, see State
Premium Subsidy and Tax Credit Limitation on page 4.

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 13
Enter on line 13 the total number of individuals shown in
column (a) of Worksheet 4. These are considered
employees for whom you paid premiums during the tax
year for health insurance coverage under a qualifying
arrangement.

Line 14
Enter on line 14 the number of full-time equivalent
employees (FTEs) shown on Worksheet 7, line 3. These
are FTEs for whom you paid premiums for health
insurance coverage under a qualifying arrangement
during the tax year.
Note. Do not complete Worksheet 7 if Form 8941, line
12, is zero.

Line 24
Enter on line 24 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.

Worksheet 7. FTEs Enrolled in Coverage
1. Enter the total enrolled employee hours of
service from Worksheet 4, column (j) . . . . . . . . 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.
However, if the result is less than one, enter 1.
Report this amount on Form 8941, line 14 . . . . 3.

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 ..............................X hr., XX min.
Learning about the law or the form............X hr., XX
min.
Preparing and sending the form to the IRS.XX 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.

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 17
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).

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

Line 20
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. You
cannot carry this credit back to a tax year beginning
before 2010.

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