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The 2009 COBRA Subsidy Payment and the Employer Payroll Credit

Employers must claim the COBRA subsidy premium credit against their payroll taxes during the same calendar year.

The COBRA subsidy premium credit must be claimed against the employer's payroll taxes in the same calendar year as premiums were paid by the Assistance Eligible Individual (AEI).

The IRS Web site provides answers to common questions. Question FP-15 directly addresses this issue:

Q. Is the employer required to claim the credit on Form 941 for the quarter during which the COBRA subsidy is provided to assistance eligible individuals?
A. No. Instead of claiming the credit on Form 941 for the quarter during which the COBRA subsidy is provided, the employer may generally choose to claim the credit on Form 941 for a later quarter in the same calendar year.

However, if an employer discovers a COBRA subsidized premium paid by an AEI during 2009 after they have filed their last fourth quarter 2009 form 941, the only way to recapture the credit is to file an amended 941x for the appropriate 2009 quarter.

A credit cannot be applied for premiums paid during 2009 toward a 2010 payroll tax liability.

Disclaimer
This document is provided for informational and educational purposes only. It is not intended to, nor does it, provide any form of legal advice regarding the subject matter of the documents. You should not take any actions on the basis of this document, but instead should seek legal advice regarding your issues.