Senate Democrats

Senate Democrats: Only 43 Percent Of Small Businesses Know About Tax Break Available Under Health Care Law — Lawmakers Urge Tax Preparers To Notify Their Small-Business Clients Of Up To $40B In Savings

In Letter, Senators Ask H&R Block, Jackson Hewitt, Other Tax Preparers To Do Their Part To Inform Clients Of Tax Break

Washington, DC—Noting a January survey that showed only 43 percent of eligible small businesses are familiar with the tax credits enacted as part of health care reform, Senate Democratic leaders today called on the nation’s leading tax preparers to help businesses take advantage of the tax break. Senate Majority Leader Harry Reid, Senate Finance Committee Chairman Max Baucus, and Senate leaders Dick Durbin, Charles E. Schumer, Patty Murray, Debbie Stabenow, and Mark Begich sent a letter urging tax preparers to notify the 4 million small businesses eligible for the tax break. The credit could provide up to $40 billion in savings.

“The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. Over 10 years, the tax credit will be worth $40 billion to our nation’s small employers,” the senators wrote. “We feel it is important that we do all we can to ensure that no one overlooks this credit.”

Eighty-three percent of all small businesses qualify for the credit. Businesses with fewer than 25 employees and average wages of less than $50,000 can receive up to 35 percent on the health insurance they provide to workers. The credit will increase to 50 percent in 2014. Over 10 years, the tax credit will save small businesses $40 billion.

“When this credit was enacted in 2010, the IRS notified eligible businesses that they would be entitled to this credit. The IRS also recently announced how eligible tax-exempt organizations – which do not generally file returns – will claim the credit during the 2011 filing season. Despite this outreach, a recent survey by the Small Business Majority found that more than half of those surveyed were still not aware of the tax credit,” they wrote.

According to a study by the Small Business Majority, nearly 1.2 million American businesses are eligible for the maximum tax credit, which the IRS estimates could save some small businesses tens of thousands of dollars. But the study also showed only 43 percent of the eligible businesses are familiar with the new tax breaks, even though the IRS has sent out 4 million postcards to heighten awareness.

A copy of the letter appears below.

January 21, 2011

Alan M. Bennett

President and Chief Executive Officer

H&R Block World Headquarters ?One H&R Block Way ?Kansas City, MO 64105

Philip Sanford

Jackson Hewitt Tax Service Inc. ?3 Sylvan Way ?Suite 301 ?Parsippany, NJ 07054

Dear Mr. Bennett and Mr. Sanford:

As you prepare for the 2010 tax filing season, we request that you take all necessary steps to assist small businesses in taking advantage of the small business tax credit that was enacted as part of the Affordable Care Act in 2010. Businesses with fewer than 25 workers and average wages of less than $50,000 will be eligible this year to tax credits of as much as 35% for the health insurance that they provide for their employees.  The credit will rise to a maximum of 50% in 2014.

The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. More than 4 million small businesses, or 83% of all small businesses in the United States, will be eligible to receive the tax credit in 2010.  Over 10 years, the tax credit will be worth $40 billion to our nation’s small employers.  We feel it is important that we do all we can to ensure that no one overlooks this credit and that is why we are reaching out to you and asking for help.

When this credit was enacted in 2010, the IRS notified eligible businesses that they would be entitled to this credit. The IRS also recently announced how eligible tax-exempt organizations –– which do not generally file income tax returns –– will claim the credit during the 2011 filing season. Despite this outreach, a recent survey by the Small Business Majority found that more than half of those surveyed were still not aware of the tax credit.

The IRS has given an example of the benefits that will be received by a typical small business. For example, a restaurant with 40 part-time employees will receive tax relief of $28,000 in 2010 to help pay for the cost of providing health insurance to their employees. According to a study by the Small Business Majority, approximately 1,198,700 American small businesses will be eligible to receive the maximum tax credit in 2010.

We hope you will do your part to heighten awareness of this valuable credit that will reduce costs for small businesses.  Upon deliverance of final tax documents to your eligible small business clientele this tax season, we urge you to provide written notifications explaining the availability of this tax break.

Small businesses and their employees cannot afford to miss out in claiming this important tax credit and we hope you agree with us and take all steps to ensure it is not overlooked.

Sincerely,

Senate Majority Leader Harry Reid (D-NV)    

Senate Finance Committee Chairman Max Baucus (D-MT)

Senate Assistant Majority Leader Dick Durbin (D-IL)                      Senate Democratic Vice Chairman Chuck Schumer (D-NY)

Senate Democratic Conference Secretary Patty Murray (D-WA)                             

Senate Democratic Policy and Communications Vice Chair Debbie Stabenow (D-MI)

Senate Democratic Steering and Outreach Chairman Mark Begich (D-AK)

cc:

American Institute of Tax Professionals (AICPA)

National Association of Enrolled Agents (NAEA)

National Association of Tax Professionals (NATP)

National Society of Tax Professionals (NSTP)

National Society of Accountants (NSA)

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