Is this right? A business has 1 FT emp making $36000 and 1 PT making $20000. When figuring the health care credit it looks like you have to round down the count then divide into the pay. That means 1 emp, $56000 pay. That puts the average over the limit ($50000) therefore no credit. Right?
You have to convert the PT employee into a full-time equivalent (FTE). Divide the total hours the person works by 2080 hours per year. For example if the PT worker works 1040 hours per year (20 hours/week) then he/she is a 0.5 FTE. Add this to your full time employee to get 1.5 FTEs. Now divide your total payroll by the FTEs. In the example $56,000/1.5 = $37,333 which would qualify.
When figuring the small business health care credit for a part year business, do the salaries need to be annualized as well as the hours of service.
It looks to me like the software rounds the 1.5 down to 1FTE then divides that into the $56000 which results in being over the $50000 limit.
There are lots of ways of counting hours worked. "If you worked on a day, you worked 8 hours" is an acceptable method. "If you worked in a week, you worked 40 hours" is a method. Pick a method that gives you 2 FTEs.
http://www.irs.gov/newsroom/ar...
To calculate the total number of hours of service which must be taken into account for an employee for the year, the employer may use any of the following methods: (1) determine actual hours of service from records of hours worked and hours for which payment is made or due, including hours for paid leave; (2) use a days-worked equivalency whereby the employee is credited with 8 hours of service for each day for which the employee would be required to be credited with at least one hour of service under Method 1; or (3) use a weeks-worked equivalency whereby the employee is credited with 40 hours of service for each week for which the employee would be required to be credited with at least one hour of service under Method 1. Employers do not have to use the same method for all employees, but may apply different methods for different classifications of employees, if the classifications are reasonable and consistently applied.
