On September 11, 2012, IRS Deputy Commissioner for Services and Enforcement Steven Miller testified before the House Ways and Means Committee about the IRS' implementation of Obamacare.  One part of his testimony was actually fairly amusing:

The IRS conducted an extensive outreach and implementation program for the Small Business Health Care Tax Credit.  Shortly after the ACA [Affordable Care Act, aka Obamacare] was passed, the IRS determined the necessary steps to both implement the credit and track these efforts.  The IRS conducted significant outreach, communication, and educational activities to inform small businesses and tax professionals about the credit.

We created a special page on our web site, IRS.gov, just for the Small Business Health Care Tax Credit.  From there, taxpayers could use a step-by-step guide to see if they qualified for the credit and how to claim it.  There are also links to a Question and Answer section, a special You Tube video, legal guidance, news releases, and information flyers.

In Washington, DC-speak, that can be summed up rather succinctly: "when this fails, don't blame us."  It's becoming clearer and clearer that this tax credit was designed to fail.

Few small employers will want to compile the records.  In order to comply, a small business owner has to file Form 8941 with the IRS.  This 20-line form requires employers to report the number of employees they have, the average amount they are paying them, the total amount spent in premiums on them, and the average premiums for small-group coverage in their area.  And that's just if you have a simple situation.

Alternatively, employers can simply deduct their insurance premiums as a business expense and be done with it.  That's what most if not all small employers will continue to do.

Small employers aren't using it.  The proof is in the pudding.  CBO downgraded their estimated tax score in half, from $40 billion to $20 billion over the first decade of Obamacare.  The massive PR blitz this spring by both IRS and HHS is more evidence.  The final nail in the coffin, though, is the testimony above.

Small employers aren't ignored by the healthcare law, however.  They can look forward to a costly employer mandate, or a tax fine of $2000 per employee if they don't comply.  They can expect to see their tax rate rise under President Obama's budget, since he wants to raise the top two marginal tax rates (at which a majority of small employer profits face taxation).  That doesn't even count the hike in the Medicare tax rate, which falls doubly on the self-employed.  If a small employer is in the tanning industry or makes medical devices, there are special new excise taxes just on them.