Have you been claiming a credit for the COBRA premium assistance payments you have provided to eligible individuals on your quarterly payroll tax return – Form 941?
The American Recovery and Reinvestment Act of 2009 established a subsidy, whereby eligible individuals, who were involuntarily terminated from employment between September 1, 2008 and March 31, 2010 might be eligible for a 65 percent subsidy of their COBRA premiums for a period of up to 15 months. The Continuing Extension Act of 2010, enacted on April.15, 2010 extended the period to May.31, 2010.
This is how the program works: eligible individuals pay 35 percent of the COBRA premium to the employer. The employer submits 100 percent of the premium and then is reimbursed for the remaining 65 percent by claiming a credit for the subsidy on their payroll tax return (IE: Form 941, Form 944 or Form 943).
In claiming the 65 percent credit, an employer can either reduce their payroll tax deposits during the quarter for which they have received the 35 percent premium payments from the eligible individuals or they can claim the subsidy as an overpayment and have the excess refunded to them.
If you have not claimed the credit on the originally filed Form 941 for the quarter during which the COBRA subsidy was provided and in the quarter you reduced your payroll tax deposits, then you should file a Form 941-X for that quarter. If you have not filed the amended 941 and need our assistance, please give us a call at 919-942-8700. Additional information including employer questions and answers regarding the COBRA Subsidy program can be found on the IRS website at: http://www.irs.gov/newsroom/article/0,,id=222173,00.html and at http://www.irs.gov/newsroom/article/0,,id=204709,00.html
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