Despite efforts to inform people about the Small Business Health Care Tax Credit, many eligible taxpayers failed to claim this tax benefit on 2010 returns. Consequently, the Treasury Inspector General for Tax Administration recommends some further tax preparation education.The IRS revealed in May 2011 that approximately 228,000 taxpayers claimed the credit. This is far short of the estimated 4.4 million taxpayers who are eligible. Claims for the credit amounted to $278 million, which is much less than the $2 billion the Congressional Budget Office estimated that claims for the credit on 2010 tax returns would total.Availability of the credit continues for future years. Employers can claim the credit for 2010 through 2015 tax years. This means a review of qualifications for the credit is relevant for tax preparer CPE. The Small Business Health Care Tax Credit is available to small employers who pay at least one-half the cost of health insurance coverage for employees. A business must employ 25 or fewer workers.Industry groups and professional organizations have stated that claiming the credit requires considerable time and effort. This explains why only 14 percent of eligible businesses claimed the credit. However, IRS tax preparer material reveals a basic method for determining situations where the credit is applicable.The essential requirement for this credit is that average income of employees cannot exceed $50,000. Including this calculation in a tax preparer guide is a quick path to identifying businesses that qualify for the credit. The actual calculation does involve some tricky mathematics when considering employee wages. Therefore, a simple computer spreadsheet is a helpful tax preparation tool.Total wages are not merely divided by employee headcount. Instead, the equation considers full-time equivalent wages. That is, wages of hourly workers are counted as if they had worked 2,080 hours per year. Therefore, tax preparer jobs in determining the tax credit demand knowing both total wages and hours worked for each employee. Business owners and their family members are not counted in the tax credit calculation. This includes S corporation owners. Their salaries are excluded in the formula of compensation per employee. So are any of their children that they employ.The maximum credit of an ordinary for-profit business in 2010 through 2013 tax years is 35 percent of health insurance premiums paid. The credit increases to 50 percent of premiums in 2014.Because partnerships and S corporations are pass-through entities, the Small Business Health Care Tax Credit for these types of operations is reported on the K-1s of partners and shareholders. Accordingly, tax preparer work on Form 1040 for these individuals entails knowing how to report the credit.IRS Circular 230 DisclosurePursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.