2010: Will Your Small Business Claim the Health Care Tax Credit?

The Internal Revenue Service this week started mailing out postcards to small businesses and tax-exempt organizations to raise awareness of benefits that were enacted with the federal Patient Protection and Affordable Care Act last month.

The IRS mailed approximately 54,000 postcards throughout Connecticut. More information about state-by-state distribution of the postcard may be viewed here.

The health care tax credit passed by Congress and signed by President Barack Obama is one of the first health care reform provisions to take effect and is designed to make it more affordable for small businesses and nonprofits to maintain existing coverage or begin offering coverage to their employees.

“We want to make sure small employers across the nation realize that, effective this tax year, they may be eligible for a valuable new tax credit. Our postcard mailing – which is targeted at small employers – is intended to get the attention of small employers and encourage them to find out more," IRS Commissioner Doug Shulman said in a statement Tuesday. “We urge every small employer to take advantage of this credit if they qualify.”



Eligible small businesses will be able to claim the credit as part of the general business credit starting with the 2010 income tax return filed in 2011. For tax-exempt organizations, the IRS will provide further information on how to claim the credit. Click here for an online guide.

In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations, the IRS said.

The maximum credit goes to smaller employers – those with 10 or fewer full-time equivalent (FTE) employees – paying annual average wages of $25,000 or less. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals.

The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more.



Please comment below on whether your business offers health coverage and you plan to claim the credit or if you are unable to offer health insurance to your staff and the credit will not help. We want to hear from you...

Healthcare Stocks Continue to Ignore Healthcare Reform

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

During my 22-year career, there have been countless macro events that the stock market knew was coming. As far back as 1990 when Iraq invaded Kuwait, the market (and the world) knew of the deadline that the U.S. placed on Iraq to vacate Kuwait. With each passing day, as cargo plane after cargo plane landed in Saudi Arabia with troops and supplies, and more and more ships anchored offshore in the Persian Gulf, the point of no return got closer and closer.

When then-Secretary of State James Baker and Tariq Aziz from Saddam Hussein’s regime emerged from a last-ditch effort meeting and told the world that no deal had been reached in early 1991, the market reacted negatively, as expected, with war just days away. But a funny thing happened on the way to collapse, stocks stopped going down and began to stabilize. It was widely anticipated that a market sell off would ensue as the first bullets were fired.

As stocks rallied moderately into the day of reckoning, it was pretty hard to believe with a war against one of the most powerful armies on earth on their home turf imminent. And when the U.S. began the air assault on Jan. 16, 1991, the stock market took off like a rocket the very next day and never, ever looked back.





The point of this example and others like it is that the stock market is the single greatest discounting mechanism in the world. Investors shouldn’t try to anticipate what a reaction might be on an event. Just let the market tell you. As history has shown, fighting the tape or trend has been a futile exercise in most cases.

Since the presidential election in 2008, health care reform has been on the front burner for Congress and Barack Obama. I’ve written many articles since the inauguration arguing that no watershed reform was going to take place, simply because the health care stocks showed no sign of any concern. As the voices grew louder and both houses of Congress began crafting legislation, I remained firm in my conclusion, again, because the health care group was behaving extremely well.

If there was any chance that health care reform was going to dramatically change the landscape, those stocks would have seen significant institutional distribution, not the almost melt up move they’ve seen since November. It’s almost as if the sector has arrogantly thumbed its nose at Congress’ attempted fixes.



Whether or not meaningful health care reform passes, and I think almost everyone agrees we need some kind of reform, the relevant takeaway is that the stock market snuffed this out long before anyone else, just like it did with the first war in the Persian Gulf in 1991.

Keep an eye on the markets for future events to give hints as to the outcome!

Please feel free to email me with any questions or comments at Paul@investfortomorrow.com.

Until next time…

Paul Schatz

New Credit Card Protections Taking Effect

Phases of federal legislation known as the CARD Act (Credit Card Accountability, Responsibility and Disclosure), signed by President Barack Obama in May, take effect Aug. 20 that change rules related to notification to consumers.

Credit card issuers must give card holders 45 days notice, up from 15, before any increases to interest rates, fees or finance charges; and before any other significant changes to an account. The present requirement is 15 days.

If you get such a notice, you may shop around for better rates or, under the CARD Act, you are allowed to reject the rate increase by closing down the credit card account. A caveat is that you would have to pay off the balance within five years at your existing interest rate.

There is another consumer benefit kicking in.

Card holders must receive their monthly billing statements 21 days before the due date in order for credit card companies to charge a late fee, rather than the current leeway of only 14 days.

“The new rules of the road established by the Credit CARD Act will shield credit cardholders from widespread abusive practices. New protections will give American families more time to pay their credit card bills every month, and time to shop around for a better deal if their rate is being raised,” U.S. Senate Banking Committee Chairman Christopher Dodd, D-Conn., said in a statement.

Dodd introduced the legislation to Congress.

Credit card companies, however, have been trying to offset likely drops in revenue that would result from the CARD Act provisions by eliminating fixed rates and implementing variable interest rates only; introducing annual fees on cards that did not charge them; and raising other charges such as balance-transfer fees, said Bill Hardekopf, chief executive officer of Lowcards.com and author of the Credit Card Guidebook.

Lowcards.com is a Web site that allows consumers to compare terms and rewards offered by various credit card companies and to keep up to date on credit card industry news.

Hardekopf hosted a live chat with the New Haven Register on Aug. 12 about the legislation and how credit card industry changes affect consumers.

Dodd said the first set of provisions are "important first steps" for American consumers. “Unfortunately, some credit card companies are trying to squeeze their customers before the clock runs out on ‘any time, any reason’ rate increases. These companies will be held accountable for rate hikes when the full Credit CARD Act takes effect.”

The CARD Act will go into effect fully in February 2010.

Dodd has asked Federal Reserve Chairman Ben Bernanke to enforce a provision that requires credit card companies to review accounts every six months if they raised the interest rate. If the credit card holder has improved his or her credit standing and the circumstances causing the increase no longer exist, then companies must reduce the rate.

Click here for a summary of the CARD Act.