A Dallas employer has full-time, part-time and seasonal workers on its payroll. Under the Texas small group eligibility rule, how is the employer's status as a small employer determined?

Why C is correct

Under 28 TAC 26.8, the count used to decide small employer status is a count of eligible employees, meaning the workers who satisfy the rule's eligibility conditions, not a headcount of every name on the payroll. Practically, part-time and seasonal workers who fail those conditions fall outside the count, so an agent should not simply run down the payroll list or substitute a revenue test when deciding whether the employer is a small employer.

Why the other options are wrong

• A) A tax reporting form count sweeps in workers who are not eligible employees under the rule; the eligible-employee count controls.
• B) Owners and officers are not the only workers counted, and limiting the count to them distorts the employer's status.
• D) The rule's test is based on eligible employees, not on the employer's annual revenue.

Memory hook

Count eligible employees, not every name on the payroll.