How to utilize the HSA Store   

IRS provides details on qualified research credit

During a December 1 payroll industry conference call, the IRS discussed the recent increase in the qualified small business payroll tax credit for increasing research activities as provided under the Inflation Reduction Act.

Background: A provision of the Inflation Reduction Act allows a “qualified small business” (QSB), for tax years beginning after December 31, 2022, to apply an additional $250,000 in qualifying expenses as a payroll tax credit against the employer share of Medicare. Prior to the act, a QSB could apply $250,000 against the employer share of Social Security. The total credit that may be applied will be $500,000 beginning after December 31, 2022. Unused amounts of the credit may be carried over.  

Future form revisions: The IRS noted that Form 6765 (Credit for Increasing Research Activities) and its instructions must be revised and will reflect the increased $500,000 limit for the payroll tax credit election. Further, Form 8974 (Qualified Small Business Payroll Tax Credit for Increasing Research Activities) and its instructions must be updated to calculate the amount of credit that can be applied against both Social Security and Medicare. The IRS anticipates the updated forms to be released during the first quarter of 2023.

Claiming the credit: The IRS emphasized that the calculation of the credit does not change on Form 6765 and that only the amount of the credit increases. This form is attached to tax returns as an annual election and cannot be made for the tax year if the election was made for five or more preceding tax years. Taxpayers can claim the credit on Form 941 starting with the first quarter that began after the election. Form 8974 must be completed and attached to Form 941. When the new election with the $500,000 limit is made on Form 6765 that is in effect for 2023 tax year, the IRS expects that it will be claimed in 2024.

Electronic filing of Form 8974: This form is available to be filed electronically. Moreover, Form 8974 can be used to indicate up to a $250,000 credit for the employer share of Social Security and an additional $250,000 credit for the employer share of Medicare. Amounts that are not used can be carried over to a subsequent employment tax return.

Source: Thomson Reuters

How to utilize the HSA Store   

FAQs associated with SIHRAs

Back in the spring, NueSynergy wrote about the basics of a Spousal Incentive Health Reimbursement Arrangement (SIHRA). Now, as the year closes, NueSynergy is excited to list off many frequently asked questions (FAQs), associated with this account. Here they are as followed:

How does a SIHRA work and how is it beneficial?

A SIHRA’s goal is to offer an employee’s spouse the opportunity for full coverage on eligible health expenses without the hassle of co-pays, coinsurance, and deductibles. This is all possible if an employee is part of a company’s group health plan. Once that’s established, then an employee can simply elect their spouse and/or dependent(s) to the plan. This allows their spouse to become incentivized through a SIHRA if he/she has access to a group health plan through their employer or a different organization.

When does enrollment start?

Enrollment takes place either within 30 days of a qualifying event, during the spouse’s annual open enrollment window or once a new employee is eligible for benefits.

What’s the enrollment process?

The process is as follows:

  • Employee elects coverage for themselves (or employee + dependent) on employer-sponsored group health plan
  • Employee’s spouse enrolls in his/her qualified alternate group health plan
  • Employee (or their spouse) completes SIHRA enrollment and attestation e-forms via the online benefit administration system and provides proof of premium contribution paid for alternate group plan coverage

How to complete SIHRA enrollment?

In order to complete enrollment, a spouse is required to provide:

  • Proof of paid premium contribution: paystub showing premium contribution amount (pre or post tax)
  • Plan details indicating the cost of each coverage tier (not required if the entire family is enrolling)

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