To do before May 15: tax credit for nonprofit organizations, including churches

Even if your organization doesn’t file a Form 990, you may be eligible for the health care insurance small employer credit under the new Healthcare law. Nonprofit organizations, including churches and ministries, can receive up to 25% of paid healthcare premiums back into the organization as a refund on Form 990-T.

Here’s what you need to do:

If you are a tax-exempt employer filing Form 990-T ONLY to request a credit on form 8941 (Credit for Small Employer Health Insurance Premiums), you must complete the following portions of Form 990-T:

1)      Complete the heading at the top of page 1 (before Part I), except for items E, H and I.

2)      Enter “0” on line 13, column (A), line 34, and line 43.

3)      Enter the credit from line 25 of Form 8941 on line 44f

4)      Complete line 45, 48, 49

5)      Write “REQUEST FOR 45R CREDIT ONLY” on the top of the Form 990-T

6)      Complete the signature area.  Must be signed and dated by an authorized officer of the organization.

7)      Attach Form 8941 to the 990-T before filing.

Form 990-T is normally only required if an organization has $1,000 or more in UBTI (unrelated business taxable income).  You will not be required to complete the 990-T in future years unless you meet the gross UBTI threshold –or- wish to take advantage of another refundable credit.

One important thing to remember is to carefully go through the computation of FTE (full-time equivalent) employee per Form 8941 instructions.  In our experience, this is the calculation that reduces the credit for most of our clients.  If the FTE is computed incorrectly, you may initially receive a refund for more than you’re entitled, which may generate a notice for repayment from the IRS in a later year.