There’s a hitch to reporting COBRA premium subsidies that could cause problems with the fourth-quarter Form 941, due the end of this month.
IRS says taking a credit in the wrong quarter for a subsidy the employee received in 2009 but paid for in 2010 could create a big paperwork hassle. Say a former worker pays his 35% share of the COBRA premium for 2009 coverage on 1/20/10. You may claim the credit for the related premium subsidy on Form 941 for either:
- the quarter in 2010 in which you receive the individual’s 35% premium payment, or
- a later quarter in 2010.
The credit can’t be claimed for a quarter in 2009, regardless of the fact that the premium is for coverage during 2009.
In all cases, however, if an employer chooses to reduce its payroll tax deposits during the quarter based on the receipt of the individual’s 35% premium payment, the company must claim the credit for the related subsidy amount on Form 941 for the quarter during which its payroll tax deposits were reduced. In addition, of course, an employer may only claim credit for the subsidy amount once.