Instructions For Form 8941 - Credit For Small Employer Health Insurance Premiums - 2010 Page 2
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8spouse are both eligible small employers, you can file
for determining worker status. Self-employed ministers
two Forms 8941 with a jointly filed Form 1040.
are not considered employees.
Individuals Considered Employees
FTE Limitation
In general, all employees who perform services for you
Your credit is reduced if you had more than 10 FTEs for
during the tax year are taken into account in determining
the tax year. If you had 25 or more FTEs for the tax year,
your FTEs, average annual wages, and premiums paid.
your credit is reduced to zero. However, you can still
Rules that apply to certain types of employees are
receive a credit from a partnership, S corporation,
discussed below.
cooperative, estate, or trust (see the instructions for line
15 on page 8).
Excluded employees. The following individuals are not
considered employees when you figure this credit. Hours
How to figure FTEs. To figure the number of FTEs you
and wages of these employees and premiums paid for
had for the tax year, you must do the following.
them are not counted when you figure your credit.
1. Figure the total hours of service (discussed below)
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The owner of a sole proprietorship.
for the tax year of all individuals considered employees.
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A partner in a partnership.
2. Divide the total hours of service by 2,080.
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A shareholder who owns (after applying the section
3. If the result is not a whole number (0, 1, 2, etc.),
318 constructive ownership rules) more than 2% of an S
generally round the result down to the next lowest whole
corporation.
number. For example, 10.99 is rounded down to 10.
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A shareholder who owns (after applying the section
However, if the result is less than one, round up to 1.
318 constructive ownership rules) more than 5% of the
outstanding stock or stock possessing more than 5% of
Employee hours of service. An employee’s hours of
the total combined voting power of all stock of a
service for a year include the following.
corporation that is not an S corporation.
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Each hour for which the employee is paid, or entitled to
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A person who owns more than 5% of the capital or
payment, for the performance of duties for the employer
profits interest in any other business that is not a
during the employer’s tax year.
corporation.
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Each hour for which an employee is paid, or entitled to
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Family members or a member of the household who is
payment, by the employer on account of a period of time
not a family member but qualifies as a dependent on the
during which no duties are performed due to vacation,
individual income tax return of a person listed above.
holiday, illness, incapacity (including disability), layoff,
Family members include a child (or descendant of a
jury duty, military duty, or leave of absence (except that
child), a sibling or step sibling, a parent (or ancestor of a
no more than 160 hours of service are required to be
parent), a step-parent, a niece or nephew, an aunt or
counted for an employee on account of any single
uncle, or a son-in-law, daughter-in-law, father-in-law,
continuous period during which the employee performs
mother-in-law, brother-in-law, or sister-in-law. A spouse
no duties).
is also considered a family member for this purpose.
Do not include hours of service of any seasonal
Leased employees. Do not use premiums paid by the
employee who worked 120 or fewer days during the tax
leasing organization to figure your credit. Also, a leased
year. Also, do not include more than 2,080 hours of
employee who is not a common law employee is
service from any employee.
considered an employee for credit purposes if he or she
To figure the total number of hours of service you must
does all the following.
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take into account for an employee for the year, you can
Provides services to you under an agreement between
use any of the following methods.
you and a leasing organization.
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Has performed services for you (or for you and a
Actual hours worked method. Determine actual
related person) substantially full time for at least 1 year.
hours of service from records of hours worked and hours
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Performs services under your primary direction or
for which payment is made or due (payment is made or
control.
due for vacation, holiday, illness, incapacity, etc., as
described above).
But do not use hours, wages, or premiums paid with
respect to the initial year of service on which leased
Days-worked equivalency method. Use a
employee status is based.
days-worked equivalency whereby the employee is
Seasonal employees. Seasonal employees who work
credited with 8 hours of service for each day for which
for you 120 or fewer days during the tax year are not
the employee would be required to be credited with at
considered employees in determining FTEs and average
least one hour of service under the rules described
annual wages. But premiums paid on their behalf are
above.
counted in determining the amount of the credit.
Weeks-worked equivalency method. Use a
Seasonal workers include retail workers employed
weeks-worked equivalency whereby the employee is
exclusively during holiday seasons.
credited with 40 hours of service for each week for which
Household and other nonbusiness employees.
the employee would be required to be credited with at
Household employees and other employees who are not
least one hour of service under the rules described
performing services in your trade or business are
above.
considered employees if they otherwise qualify as
Average Annual Wage Limitation
discussed above. A sole proprietor must include both
business and nonbusiness employees to determine
Your credit is reduced if you paid average annual wages
FTEs, average annual wages, and premiums paid.
of more than $25,000 for the tax year. If you paid
Ministers. A minister performing services in the
average annual wages of $50,000 or more for the tax
exercise of his or her ministry is treated as self-employed
year, your credit is reduced to zero. However, you can
for social security and Medicare purposes. However, for
still receive a credit from a partnership, S corporation,
credit purposes, whether a minister is an employee or
cooperative, estate, or trust (see the instructions for line
self-employed is determined under the common law test
15 on page 8).
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