Credit for Small Employer Health Insurance Premiums

Tax Forms & Publications
Work Request Notification (WRN)/Circulation
Product I8941
Title

Instructions for Form 8941, Credit for Small Employer Health Insurance Premiums

Tax year 2020

Processing year 2021

This is the 1st circulation of this product for your review and comments and can be used to support any necessary work requests.
Note that this document is for internal use only--Do not distribute outside of the IRS/Treasury.
Authority for changes that may impact a Unified Work Request (UWR) (For changes, see Description of Major Changes below)

Signature of Approving Official

Circulation signature date
Digitally signed by Lorinda O. Chin
DN: c=US, o=U.S. Government, ou=Department of the Treasury, ou=Internal Revenue Service,
ou=People, serialNumber= WR2NB, cn=Lorinda O. Chin
Date: 2020.07.23 07:24:59 -0400

Lorinda O. Chin

07/23/2020

Description of major changes (A description of changes to a form's instructions that may impact a UWR is also included, as applicable)
General Instructions
Purpose of Form. We edited the last paragraph for clarity. [Taxpayer Advocacy Panel]
Eligible Small Employers:
In the second item, we added an example and changed the icon from TIP to CAUTION. [Taxpayer Advocacy Panel]
In the third item and the caution under it, we changed $55,000 to $56,000. [IRC 45R(c)(2); IRC 45R(d)(1)(B); IRC 45R(d)(3)(B); Rev. Proc. 201944, sec. 3.11]
Qualifying Arrangement. We edited the "Wellness program" paragraph for clarity. [Taxpayer Advocacy Panel]
Specific Instructions
Line C. We changed "2014, 2015, 2016, or 2017" to "2014, 2015, 2016, 2017, or 2018" to reflect the 2-consecutive-tax year credit period. [IRC
45R(a); IRC 45R(e)(2); IRC 45R(g)(1)]
Worksheet 3. Information Needed To Complete Line 3. We changed $55,000 to $56,000. [IRC 45R(c)(2); IRC 45R(d)(1)(B); IRC 45R(d)(3)(B);
Rev. Proc. 2019-44, sec. 3.11]
Worksheet 6. Information Needed To Complete Line 9. On lines 4 and 5, we changed $27,100 to $27,600. [IRC 45R(c)(2); IRC 45R(d)(3)(B); Rev.
Proc. 2019-44, sec. 3.11]
We removed all references to Form 1040-SR in the parentheticals. [TF&P Initiative]
The Department of Health and Human Services will release the 2020 average premium table for small group markets later in the year.

Comments: Comments are due 30 days after the date this circulation is signed and issued, unless a different date is specified here:
Comments should be sent via email to both the Tax Law Specialist and Reviewer listed below. We will accept comments after the due date, but may not
be able to consider any comments (timely or not) for this revision if implementing the comments would require a late UWR. If we need to make
significant changes based on comments or other new information received, we normally will issue a subsequent circulation of this product; otherwise,
these changes are final unless indicated otherwise in the Description of Major Changes.

Name of Tax Law Specialist Adaline Belen Torres

Name of Reviewer Lorinda O Chin

Email address [email protected]

Email address [email protected]

Form 14216 (Rev. 6-2014)

Catalog Number 57440M

publish.no.irs.gov

Department of Treasury - Internal Revenue Service

Userid: CPM

AH XSL/XML

Schema:
Leadpct: 100% Pt. size: 10
instrx
Fileid: … ions/I8941/2020/A/XML/Cycle02/source

Page 1 of 10

Draft

Ok to Print

(Init. & Date) _______

10:47 - 16-Jul-2020

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

2020

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.

tax under section 1381 may be able to claim the credit as
a general business credit, as discussed next.

Future Developments

For all other eligible small employers, the maximum
credit is 50% of premiums paid and can be taken against
both regular and alternative minimum tax. The credit is
claimed as part of the general business credit on Form
3800.

For the latest information about developments related to
Form 8941 and its instructions, such as legislation
enacted after they were published, go to IRS.gov/
Form8941.

f
o

s
a
0
2
t
f 0

Reminders

Partnerships, S corporations, cooperatives,

TIP estates, trusts, and tax-exempt eligible small

Exception for eligible small employers in certain
counties. Certain small employers whose principal
business address is in a county with no qualified health
plan through a Small Business Health Options Program
(SHOP) Marketplace may be able to claim the credit for
small employer health insurance premiums. For more
information, see Exception for eligible small employers in
certain counties in the instructions for line A.

employers must file this form to claim the credit.
All other taxpayers must not complete or file this form if
their only source for this credit is a partnership, S
corporation, cooperative, estate, or trust. Instead, they
must report this credit directly on line 4h in Part III of Form
3800, General Business Credit.

2
a
/
r
6
D /1

Waiver for Hawaii. Employers in Hawaii can’t claim this
credit for insurance premiums paid for health plan years
beginning after 2016. For more information, see Waiver
for Hawaii in the instructions for line A.

7
0

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. For tax
years beginning after 2013, the credit is only available for
a 2-consecutive-tax-year credit period. The maximum
credit is generally a percentage of premiums the employer
paid during the tax year for certain health insurance
coverage the employer provided to certain employees
enrolled in a qualified health plan offered through a Small
Business Health Options Program (SHOP) Marketplace.
But the credit may be reduced by limitations based on the
employer’s full-time equivalent employees, average
annual wages, adjusted average premiums, and state
premium subsidies and tax credits.
For information about insurance plans offered

TIP through a SHOP Marketplace, visit
Healthcare.gov.

For tax-exempt eligible small employers, the
maximum credit is 35% of premiums paid, is 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 eligible 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
Jul 16, 2020

Eligible Small Employers

You’re 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 later). However, an
arrangement that requires you to pay a uniform premium
for each enrolled employee (composite billing) and offers
different tiers of coverage (for example, employee-only,
dependent, and family coverage) can be a qualifying
arrangement even if it requires you to pay a uniform
percentage that is less than 50% of the premium cost for
employees not enrolled in employee-only coverage.
In addition, an arrangement that requires you to pay a
separate premium for each employee based on age or
other factors (list billing) can be a qualifying arrangement
even if it requires you to pay a uniform percentage that is
less than 50% of the premium cost for some employees.
For 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 example, an employer with 48 employees that are
each half-time employees has 24 FTEs and can claim the
credit. For details, see Worksheets 1 and 2.
Although the term “eligible small employer” is
defined in the Internal Revenue Code to include
CAUTION employers with “no more than” 25 FTEs, the
phaseout of the credit amount operates in such a way that
an employer with exactly 25 FTEs is not, in fact, eligible
for the credit.

!

Cat. No. 55222U

Page 2 of 10

Fileid: … ions/I8941/2020/A/XML/Cycle02/source

10:47 - 16-Jul-2020

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

Employer Premiums Paid

3. You paid average annual wages for the tax year of
less than $56,000 per FTE. For details, see Worksheets
1 and 3.

Only premiums you paid for health insurance coverage
under a qualifying arrangement (discussed later) for
individuals considered employees are counted when
figuring your credit.

If you had more than 10 FTEs and average
annual wages of more than $27,000, 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 $56,000.

!

State premium subsidy or tax credit. If you’re entitled
to a state tax credit or a state premium subsidy paid
directly to you for premiums you paid, don’t 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.

f
o

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.
• Tax-exempt employers under common control. See
Regulations section 1.414(c)-5.
For details, see section 45R(e)(5)(A) and Regulations
section 1.45R-2(b).

s
a
0
2
t
f 0

Wellness programs. A wellness program is generally an
insurance program of health promotion or disease
prevention. If you pay part or all of the cost of an
employee’s participation in a wellness program, use the
amount you paid to figure your employer premiums paid.
Tobacco surcharges. A tobacco surcharge is generally
an additional amount charged for insurance for a tobacco
user. If you pay part or all of an employee’s tobacco
surcharge, you can’t use the amount you paid to figure
your employer premiums paid.

2
a
/
r
6
D /1

Dependent coverage. Dependent coverage is generally
coverage offered separately to an individual who is or may
become eligible for coverage under the terms of a group
health plan because of a relationship to a
participant-employee, whether or not a dependent of the
participant-employee. Dependent coverage doesn’t
include coverage, such as family coverage, which
includes coverage of the participant-employee. If you pay
part or all of the cost of an employee’s dependent
coverage, use the amount you paid to figure your
employer premiums paid.

No more than one Form 8941 can be filed with a
TIP tax return, unless the exception described in
Example 2 below applies.

7
0

Example 1. You’re 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). Don’t treat both businesses as a
single employer to figure the credit. If you and your
spouse are both eligible small employers, you can file two
Forms 8941 with a jointly filed Form 1040 or 1040-SR.

Portion of premiums paid. 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 isn’t treated as an
employer paid premium. For more information on cafeteria
plans, see section 1 of Pub. 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 employee-only
coverage for each employee enrolled in any health
insurance coverage you provide to employees. The total
premium for each employee enrolled in 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 $13,000 per year
or $250 ($13,000 ÷ 52) for each weekly payday.
Each payday you contribute $60 (60% of $100) toward
the premium cost of each employee enrolled in
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 employee-only coverage) toward the premium
cost of each employee enrolled in family coverage and

Credit Period

For tax years beginning after 2013, the credit period
during which the credit can be claimed is a
2-consecutive-tax-year period beginning with the first tax
year in which:
• An eligible small employer (or any predecessor) files an
income tax return with an attached Form 8941 with line A
checked “Yes” and a positive amount on line 12, or
• A tax-exempt eligible small employer (or any
predecessor) files Form 990-T with an attached Form
8941 with line A checked “Yes” and a positive amount on
line 12.

-2-

Instructions for Form 8941 (2020)

Page 3 of 10

Fileid: … ions/I8941/2020/A/XML/Cycle02/source

10:47 - 16-Jul-2020

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

discount for participation or a surcharge for
nonparticipation. The employer contribution for
employees who don’t participate in the wellness program
must be at least 50% of the premium (including any
premium surcharge for nonparticipation). However, for
purposes of figuring the credit, the employer contributions
are taken into account, including those contributions
attributable to an employee’s participation in a wellness
program.

withhold the remaining $190 from the employee’s
paycheck to obtain the $250 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’ve paid $3,120 ($60 × 52)
for an employee who was enrolled for the entire tax year.
You would’ve paid $600 ($60 × 10) for an employee who
was only enrolled for 10 pay periods. You will need an
additional set of calculations if the premium amounts
changed during the tax year.

Health Insurance Coverage

f
o

Tobacco surcharge. Any additional amount you or your
employee pay to cover a tobacco surcharge isn’t taken
into account in figuring the uniform percentage
requirement. Amounts you or your employee pay to cover
a tobacco surcharge aren’t considered premiums paid for
health insurance coverage when figuring this credit.

s
a
0
2
t
f 0

For tax years beginning after 2013, health insurance
coverage generally means coverage provided to
employees enrolled in a qualified health plan offered
through a Small Business Health Options Program
(SHOP) Marketplace. For an exception that applies to
certain employers in certain counties, see the instructions
for line A, later. If this exception applies, health insurance
coverage means coverage, as defined under Health
Insurance Coverage in the 2013 Instructions for Form
8941.

Dependent coverage. Premiums you pay for dependent
coverage aren’t subject to the uniform percentage
requirement. You aren’t required to pay a uniform
percentage (not less than 50%) for dependent coverage.

Arrangements with composite billing. An
arrangement that requires you to pay a uniform premium
for each enrolled employee (composite billing) and offers
different tiers of coverage can be a qualifying arrangement
even if it requires you to pay a uniform percentage that is
less than 50% of the premium cost for employees not
enrolled in employee-only coverage. It is a qualifying
arrangement (assuming employee-only coverage is the
least expensive tier of coverage) if it requires you to pay
the following amounts.
• A uniform percentage (not less than 50%) of the
premium cost for each employee (if any) enrolled in
employee-only coverage.
• A uniform amount that is no less than the amount you
would’ve paid toward employee-only coverage for each
employee (if any) enrolled in family coverage.
• A uniform amount that is no less than the amount you
would’ve paid toward employee-only coverage for each
employee (if any) enrolled in any other tier of coverage
(figured separately for each tier).

2
a
/
r
6
D /1

A stand-alone dental plan offered through a

TIP SHOP exchange will be considered a qualified
health plan for purposes of the credit.

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.

!

7
0

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 earlier). An
arrangement that offers different tiers of coverage (for
example, employee-only and family coverage) is generally
a qualifying arrangement if it requires you to pay a uniform
percentage (not less than 50%) separately for each tier of
coverage you offer. However, an arrangement can be a
qualifying arrangement even if it requires you to pay a
uniform percentage that is less than 50% of the premium
cost for some employees.

Arrangements with list billing and only employee-only coverage. An arrangement that requires you to pay a
separate premium for each employee based on age or
other factors (list billing) that only provides employee-only
coverage can be a qualifying arrangement even if it
requires you to pay a uniform percentage that is less than
50% of the premium cost for some employees. It is a
qualifying arrangement if it requires you to pay either of
the following amounts.
• A uniform percentage (not less than 50%) of the
premium charged for each employee enrolled in the
employee-only coverage.
• A uniform percentage (not less than 50%) of your
employer-computed composite rate (defined later) for
your employee-only coverage for each employee enrolled
in the employee-only coverage.

For more information about the following exceptions,
see Regulations section 1.45R-4.
State or local law. You will be treated as satisfying the
uniform percentage requirement if your failure to
otherwise satisfy the requirement was solely attributable
to additional contributions you made to certain employees
to comply with state or local law.
Wellness program. If a plan of an employer provides a
wellness program, for purposes of meeting the uniform
percentage requirement, the following applies. Any
additional amount of the employer contribution attributable
to an employee’s participation in the wellness program
over the employer contribution with respect to an
employee that doesn’t participate in the wellness program
isn’t considered in calculating the uniform percentage
requirement. This is true whether the difference is due to a
Instructions for Form 8941 (2020)

Arrangements with list billing and other tiers of coverage. An arrangement that requires you to pay a
separate premium for each employee based on age or
other factors (list billing) that provides other tiers of
coverage can be a qualifying arrangement even if it
requires you to pay a uniform percentage that is less than
-3-

Page 4 of 10

10:47 - 16-Jul-2020

Fileid: … ions/I8941/2020/A/XML/Cycle02/source

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

an employer premium you paid, the amount of your credit
can’t be more than your net premium payments.

50% of the premium cost for some employees. It is a
qualifying arrangement (assuming employee-only
coverage is the least expensive tier of coverage) if it
requires you to pay the following amounts.
• A uniform percentage (not less than 50%) for each
employee enrolled in employee-only coverage, as
discussed under Arrangements with list billing and only
employee-only coverage above.
• A uniform amount that is either equal to the amount you
would’ve paid toward employee-only coverage (as
discussed above), a uniform percentage (not less than
50%) of the premium charged, or a uniform percentage
(not less than 50%) of your employer-computed
composite rate (defined below) for your family coverage,
for each employee (if any) enrolled in family coverage.
• A uniform amount that is either equal to the amount you
would’ve paid toward employee-only coverage (as
discussed above), a uniform percentage (not less than
50%) of the premium charged, or a uniform percentage
(not less than 50%) of your employer-computed
composite rate (defined below) for any other tier of
coverage, for each employee (if any) enrolled in any other
tier of coverage (figured separately for each tier).

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
subsidies 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.

f
o

Payroll Tax Limitation for Tax-Exempt
Eligible Small Employers

s
a
0
2
t
f 0

The credit for tax-exempt eligible small employers can’t
exceed the amount of certain payroll taxes. For tax years
beginning in 2020, 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 2020.
• Medicare taxes the tax-exempt employer was required
to withhold from employees’ wages in calendar year 2020.
• Medicare taxes the tax-exempt employer was required
to pay for calendar year 2020.

2
a
/
r
6
D /1

Employer-computed composite rate. The
employer-computed composite rate for a tier of coverage
is the average rate determined by adding the premiums
for that tier of coverage for all employees eligible to
participate in the health insurance plan (whether or not
they actually receive coverage under the plan or under
that tier of coverage) and dividing by the total number of
such eligible employees.

Premium Deduction Reduced

You must reduce your deduction for the cost of providing
health insurance coverage to your employees by the
amount of any credit for small employer health insurance
premiums allowed with respect to the coverage.

7
0

More Information

More than one plan. 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 exceptions, see
Regulations section 1.45R-4(c).

For more information about this credit, see the following.
• Section 45R.
• Regulations sections 1.45R-0 through 1.45R-5.
• IRS.gov/Affordable-Care-Act/Employers/SmallBusiness-Health-Care-Tax-Credit-and-the-SHOPMarketplace.

Specific Instructions

State subsidies and credits. For this purpose, if you’re
entitled to a state tax credit or a state premium subsidy
paid directly to you for premiums you paid, don’t 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.

Partnerships, S corporations, cooperatives,

TIP estates, trusts, and tax-exempt eligible small

employers must file this form to claim the credit.
All other taxpayers must not complete or file this form if
their only source for this credit is a partnership, S
corporation, cooperative, estate, or trust. Instead, they
must report this credit directly on line 4h in Part III of Form
3800.

State Premium Subsidy and Tax
Credit Limitation

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 1, 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.

Your credit may be reduced if you’re 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.
Although a state tax credit or premium subsidy paid
directly to you doesn’t reduce the amount of your
employer premiums paid, and although a state premium
subsidy paid directly to an insurance provider is treated as

Line A

Answer “Yes” if one of the following applies.
• You paid premiums for employee health insurance
coverage you provided through a SHOP Marketplace or
-4-

Instructions for Form 8941 (2020)

Page 5 of 10

Fileid: … ions/I8941/2020/A/XML/Cycle02/source

10:47 - 16-Jul-2020

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

Worksheet 1. Information Needed To
Complete Line 1 and Worksheets 2
and 3

through a direct enrollment process, if available in your
state.
• You qualify for an exception to this requirement, as
discussed below.
If you answer “Yes” because you paid premiums for
employee health insurance coverage you provided
through a SHOP Marketplace, enter the Marketplace
identifier, if any.

If you need more rows, use a separate sheet and include
the additional amounts in the totals below.
(a)
Individuals
Considered
Employees

If you answer “No,” don’t file Form 8941 unless you’re
filing it for a partnership, S corporation, cooperative,
estate, trust, or tax-exempt eligible small employer that
received from another entity a credit that must be reported
on line 15. For more information, see the instructions for
line 15.

 1.

f
o

(b)
Employee
Hours of
Service

(c)
Employee
Wages
Paid

s
a
0
2
t
f 0
 2.

Waiver for Hawaii. Hawaii has received a 5-year State
Innovation Waiver under section 1332 of the Affordable
Care Act. Employers in Hawaii can’t participate in the
SHOP Marketplace or claim the credit for insurance
premiums paid for health plan years beginning after 2016.
For more information on the waiver, visit CMS.gov.

 3.
 4.
 5.
 6.

2
a
/
r
6
D /1
 7.

Exception for eligible small employers in certain
counties. For calendar year 2020, SHOP Marketplaces
in certain counties across the United States didn’t have
qualified health plans available for employers to offer to
employees. However, relief is available, which allows
eligible small employers with a principal business address
in those counties to claim the credit for 2020 if they
properly claimed the credit under section 45R for all or
part of 2019. For details, see Notice 2018-27, 2018-20,
I.R.B. 580, available at IRS.gov/irb/
2018-20_IRB#NOT-2018-27.

 8.
 9.
10.
11.

7
0

12.
13.
14.
15.

To see whether a particular county has coverage
TIP available through a SHOP Exchange for 2020 and
beyond, go to Healthcare.gov/small-business and
enter “plans and prices” in the search box.

16.
17.
18.
19.

Line C

20.

Answer “Yes” if a tax return you (or any predecessor) filed
for a tax year beginning in 2014, 2015, 2016, 2017, or
2018 included a Form 8941 with line A checked “Yes” and
line 12 showing a positive amount. For more information,
see Credit Period, earlier.

21.
22.
23.
24.

If you answer “Yes,” don’t file Form 8941 unless you’re
filing it for a partnership, S corporation, cooperative,
estate, trust, or tax-exempt eligible small employer that
received from another entity a credit that must be reported
on line 15. An entity that qualifies for this exception
shouldn’t report any amount on line 12. For more
information, see the instructions for line 15.

25.
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.
Instructions for Form 8941 (2020)

-5-

Page 6 of 10

10:47 - 16-Jul-2020

Fileid: … ions/I8941/2020/A/XML/Cycle02/source

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

discussed above. A sole proprietor must include both
business and nonbusiness employees to determine FTEs,
average annual wages, and premiums paid.

Excluded employees. The following individuals aren’t
considered employees when you figure this credit. Hours
and wages of these employees and premiums paid for
them aren’t 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 isn’t an S corporation.
• A person who owns more than 5% of the capital or
profits interest in any other business that isn’t a
corporation.
• Family members or a member of the household who
isn’t 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 of
any owner or family member listed above is also
considered a family member for this purpose.

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
aren’t considered employees.

f
o

Column (b), Employee Hours of
Service

s
a
0
2
t
f 0

Enter the total hours of service for the tax year for each
employee listed in column (a). Don’t 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 1
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 1 hour of service under the rules described above.

2
a
/
r
6
D /1
7
0

Former employees. Premiums paid on behalf of a
former employee with no hours of service may be treated
as paid on behalf of an employee for purposes of figuring
the credit provided that, if so treated, the former employee
is also treated as an employee for purposes of the uniform
percentage requirement.
Leased employees. Don’t use premiums paid by the
leasing organization to figure your credit. Also, a leased
employee who isn’t 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 don’t use hours, wages, or premiums paid with
respect to the initial year of service on which leased
employee status is based.
Seasonal employees. Employees who perform labor or
services on a seasonal basis and perform labor or
services for you 120 or fewer days during the tax year
aren’t 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.

Column (c), Employee Wages Paid

!

CAUTION

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.

Household and other nonbusiness employees.
Household employees and other employees who aren’t
performing services in your trade or business are
considered employees if they otherwise qualify, as
-6-

Instructions for Form 8941 (2020)

Page 7 of 10

10:47 - 16-Jul-2020

Fileid: … ions/I8941/2020/A/XML/Cycle02/source

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

Worksheet 4. Information Needed To
Complete Lines 4, 5, and 13 and
Worksheet 7

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)

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

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.

(a)
Enrolled
Individuals
Considered
Employees

f
o

(b)
Employer
Premiums
Paid

(c)
Adjusted
Average
Premiums

s
a
0
2
t
f 0
 1.
 2.

2,080

 3.

3. Full-time equivalent employees.
Divide line 1 by line 2. If the result isn’t 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.

(d)
Enrolled
Employee
Hours of
Service

 4.
 5.

2
a
/
r
6
D /1
 6.
 7.
 8.
 9.

Worksheet 3. Information Needed To
Complete Line 3 (Average Annual
Wages)

10.

Your credit is reduced if you paid average annual wages
of more than $27,000 for the tax year. If you paid average
annual wages of $56,000 or more for the tax year, your
credit is reduced to zero.

14.

7
0

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 isn’t 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 . . .

11.
12.
13.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.

3.

25.
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.

Instructions for Form 8941 (2020)

-7-

Page 8 of 10

10:47 - 16-Jul-2020

Fileid: … ions/I8941/2020/A/XML/Cycle02/source

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

Column (b), Employer Premiums Paid

enrolled for the entire tax year. You would’ve paid $570
($57 × 10) if the employee was only enrolled for 10 pay
periods. You’ll need an additional set of calculations if the
premium amounts changed during the tax year.

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 (d), Enrolled Employee Hours
of Service

Column (c), Adjusted Average
Premiums

Your credit is reduced if the employer premiums paid are
more than the employer premiums that would’ve 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 rating area in which the
employee enrolls for coverage.

!

Don’t complete column (d) of Worksheet 4 if
Form 8941, line 12, is zero.

CAUTION

f
o

Enter the amount from column (b) of Worksheet 1 for
each employee listed in column (a) of Worksheet 4.

s
a
0
2
t
f 0

Worksheet 5. Information Needed To
Complete Line 8 (If Line 2 is More
Than 10)

The rating area in which an employee enrolls for
coverage is generally the rating area where your business
is located (based on your primary business address). You
will generally have selected a plan in your rating area that
covers all employees located within or outside your rating
area. However, if you have multiple businesses or
operations in multiple states, and have set up plans in
more than one SHOP Marketplace, the average premiums
may be different for employees enrolled in each SHOP
Marketplace.

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

2
a
/
r
6
D /1

Enter, for each employee listed in column (a), the
premiums you would’ve 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 rating
area in which the employee enrolls for coverage.

7
0

To find the average premium for the small group market
in a rating area for tax years beginning in 2020, see the
average premium tables at the end of these instructions.
Family coverage includes any coverage other than
employee-only coverage.

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.

1.

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 $27,000)

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
employee-only coverage and 24% ($60 ÷ $250) 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 average
premium amounts for each employee enrolled in
employee-only coverage and 24% of the applicable
average premium amounts for each employee enrolled in
family coverage.
You have an employee enrolled in employee-only
coverage who enrolled for coverage in your local rating
area. The applicable employee-only average premium
amount for the rating area is $4,940 or $95 ($4,940 ÷ 52)
for each weekly payday. The amount you would’ve paid
toward this employee’s health insurance coverage based
on the average premiums is $57 (60% of $95) each
payday.
To determine the premiums you would’ve paid for this
employee during the tax year if the employee had enrolled
in an average premium plan, multiply the number of pay
periods during which your employee was enrolled in the
health insurance coverage by $57. For example, you
would’ve paid $2,964 ($57 × 52) if the employee was

1. Enter the amount from Form 8941,
line 8 . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Enter the amount from Form
8941, line 7 . . . . . . . . . . . . .

2.

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

3.

4. Subtract $27,600 from
line 3 . . . . . . . . . . . . . . . . . .

4.

5. Divide line 4 by $27,600. Enter
the result as a decimal (rounded
to at least 3 places) . . . . . . . .

5.

1.

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.

-8-

Instructions for Form 8941 (2020)

Page 9 of 10

Fileid: … ions/I8941/2020/A/XML/Cycle02/source

10:47 - 16-Jul-2020

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

Worksheet 7. Information Needed To
Complete Line 14 (If Line 12 is More
Than Zero)

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.

1. Enter the total enrolled employee hours of
service from Worksheet 4, column
(d) . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
2. Hours of service per FTE . . . . . . . . . .
3. Divide line 1 by line 2. If the result isn’t 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 . . .

Line 15

2.

f
o

2,080

s
a
0
2
t
f 0

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.

3.

Enter any credit for small employer health insurance
premiums from:
• Schedule K-1 (Form 1065), box 15 (code P);
• Schedule K-1 (Form 1120-S), box 13 (code P);
• Schedule K-1 (Form 1041), box 13 (code G); and
• Form 1099-PATR, Taxable Distributions Received
From Cooperatives, box 12, or other notice of credit
allocation.

2
a
/
r
6
D /1
Line 19

7
0

Partnerships, S corporations, cooperatives,
TIP estates, trusts, and tax-exempt eligible small
employers report the above credits on line 15. All
other filers figuring a separate credit on earlier lines also
report the above credits on line 15. All others not using
earlier lines to figure a separate credit must report the
above credits directly on Form 3800, Part lll, line 4h.

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 2020.
• Medicare taxes the tax-exempt employer was required
to withhold from employees’ wages in calendar year 2020.
• Medicare taxes the tax-exempt employer was required
to pay for calendar year 2020.

Line 17
Cooperatives. A cooperative described in section
1381(a) must allocate to its patrons the credit in excess of

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.

h

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden
for individual and business taxpayers filing this form is approved under OMB control number 1545-0074 and 1545-0123
and is included in the estimates shown in the instructions for their individual and business 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 hr., 8 min.
1 hr., 2 min.
2 hr., 5 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.

Instructions for Form 8941 (2020)

-9-

Page 10 of 10

Fileid: … ions/I8941/2020/A/XML/Cycle02/source

10:47 - 16-Jul-2020

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

Average Premiums Needed To Figure Adjusted Amounts on Worksheet 4
The following tables list the average
premiums for the small group market

in each rating area generally listed by
county for each state for tax years

beginning in 2020. (Tables not
available until November 2020.)

f
o

s
a
0
2
t
f 0

2
a
/
r
6
D /1
7
0

-10-

2020 Average Premium Tables