Last Year for Churches to Receive Health Care Tax Credit

CHICAGO, IL (November 20, 2013) – A tax credit that has returned an estimated $2 million to Evangelical Covenant Church congregations over the past three years will end this filing season.

Churches must submit the appropriate tax forms for 2013 by May 15, 2014, in order to get the credit for this year.

“The credit is available to a church if they have federal income taxes withheld on employees and also double the amount of Medicare taxes on the W-3,” says Controller Elliott Johnson. “If there are no taxes on these lines, no credit is available.”

Qualifying churches must also have fewer than 25 full-time equivalent employees and average employee FICA wages that total less than $50,000.

Pastors must be included in the count of employees even though they are considered self-employed, says Johnson.

“The total wages that you use comes off the W-3 and line 3, where Social Security wages are included,” Johnsons says. “However, this excludes all of the pastors’ compensations.”

“It is possible for a church with only pastors receiving compensation to have an average wage of $0,” Johnson says. More information is available on forms 8941 and 990t.

Johnson explains, “On 990t write ‘For Health Care Tax Credit Only.’ Fill out line A to J, put a $0 on line 13 and then skip to 44f to put the amount of credit from 8941.”

The credit can be claimed through 2013 according to Internal Revenue Service guidelines.

Johnson said he “conservatively estimates” that Covenant entities have received $2 million since the credit was available.

As part of the Affordable Care Act enacted in March 2010, the Health Care Tax Credit for Small Employers is designed to encourage both small businesses and small tax-exempt organizations (like churches) to offer health insurance coverage to their employees for the first time or to maintain coverage they already have.

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