Sarah Borders, CEBS July 27, 2021 6 min read

Employer Alert: COBRA Subsidy Tax Credit Due July 31

If your organization had any assistance eligible individuals (AEIs) who received subsidized COBRA coverage during April, May, or June, a tax credit is available by filing Form 941 for the 2nd quarter. The form is due July 31, 2021.


With the assistance of your CPA or tax professional, an employer (called a "premium payee" under the guidance) would claim the credit under their quarterly employment tax return, using IRS Form 941 with instructions.


An employer would generally reduce deposits of federal employment taxes (including amounts withheld from employees) up to the amount of the anticipated tax credit, then report the tax credit claimed and the number of individuals receiving the tax credit for that quarter on Form 941. 


If the anticipated credit exceeds the federal employment tax deposit amount, then an employer may request an advance of that amount by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.


An employer files Form 941 at the end of each quarter but can file a Form 7200 (requesting advance payments) after the end of the payroll period in which the employer becomes entitled to the credit. However, Form 7200 cannot be filed for a period of coverage that hasn't yet started. 


IRS Notice 2021-31 includes several examples under Q/A-75, including how to claim premium assistance credit if the employer has no employment tax liability.


In addition, an employer can still claim the premium assistance credit even if the assistance-eligible individual fails to provide notice that they are no longer eligible for the COBRA premium assistance (e.g., the individual is eligible for other group health plan coverage or Medicare) unless an employer has knowledge of the disqualifying coverage/Medicare.


There is a worksheet (Worksheet 5. COBRA Premium Assistance Credit on page 29) in the Form 941 instructions that employers will need to use with the help of a CPA or tax advisor when adjusting/paying the quarterly federal tax return. Again, because this quarterly return covers the months of April, May, and June, the next filing is due on July 31, 2021.


Please be aware of this deadline and confirm with your CPA or tax advisor to receive any refundable credits for subsidized COBRA coverage under the American Rescue Plan Act.


As always, Hausmann-Johnson Insurance | The Benefit Services Group, Inc. will continue to keep you posted on the latest requirements. Please contact us with any questions.


Sarah Borders, CEBS

Principal, Benefits Compliance Solutions. Sarah has spent the last 15 years in the employee benefits industry, has numerous designations and serves on NAHU’s Employer Working Group Subcommittee and is an active board member of Austin AHU. She recently stepped down as Vice President of Benefits Compliance at one of the nation's largest brokerage firms to start her own compliance consulting practice. Her designations include an active license with the Texas Department of Insurance, CEBS (Certified Employee Benefits Specialist), Certified Health Care Reform Professional, HIPAA certification and Health Care Service Associate. She holds an MBA from Texas A&M Corpus Christi and a BA from University of Incarnate Word. Her consulting firm, Benefits Compliance Solutions, partners with employers to identify unknown risks and avoid hundreds of thousands of dollars in fines and lawsuits from failure to comply with their healthplan obligations.