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Sequester hits tax-exempts’ health tax credit

by on
in Office Management,Payroll Management

The automatic federal budget cuts that took effect on March 1, known as the sequester, reduce the refundable portion of 501(c) tax-exempt organizations’ health care tax credit by 8.7%, according to the IRS. This reduced rate applies through the end of the federal government’s fiscal year on Sept. 30, 2013, at which time it could change.

Reminder: Under the Affordable Care Act health care reform law, 501(c) tax-exempt organizations that have fewer than 25 full-time equivalent employees who earn up to $50,000, and that contribute at least 50% toward employees’ health insurance, are eligible for the tax credit. The credit is taken against the amount of taxes withheld from employees’ pay, and is reported by attaching Form 8941 to Form 990-T.

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