New Developments: Many Benefits of New Tax Laws Are Available
NOW
As we previously informed you, two recently-enacted laws,
the Hiring Incentives to Restore Employment Act (HIRE Act) and the Patient Protection and Affordable Care Act (Health Care Act), both contain many
favorable tax provisions. While some of
the changes will not be effective until future years, other benefits are
available immediately, in 2010. Here are
some developments regarding changes that can profit you today.
A Credit of up to 35% of Employee Health Insurance Premiums is Retroactive
to January 1, 2010.
The IRS has used postcards to reach out to millions of
small businesses that may qualify for a generous new tax credit. Employers with fewer than 25 employees, who
pay average wages of less than $50,000, may be eligible to receive the Small
Employer Tax Credit. This
dollar-for-dollar credit against the employer's income tax bill may offset up
to 35% of the amount paid for employee health insurance premiums. This provision was originally supposed to go
into effect in 2011, but a last-minute amendment changed the effective date to
January 1, 2010. If eligible, your
business is due a credit not only on future premiums, but even on those you
have already paid for the past four months!
In general, the credit is available to small employers
that pay at least half the cost of single coverage for their employees. The eligibility formula is based on the
number of "full time equivalent employees" (FTEs), not the actual count of
employees, so businesses with part-time workers may qualify even if they employ
more than 25 individuals. The maximum
credit (35% of premiums paid in 2010 by eligible small business employers or 25%
for tax-exempt organizations) goes to smaller employers - those with 10 or
fewer FTEs - paying annual average wages of $25,000 or less. The
credit phases out gradually for firms with higher wages and more employees. It may be claimed for up to six years. The maximum credit increases to 50% (35% for
tax-exempts) in 2014.
The credit will first be claimed on 2010 tax returns that
will be filed in 2011. Quarterly
estimated tax payments may be adjusted in many cases to receive the benefits
more quickly. More information can be
found on the White House Fact Sheet or in the IRS's Frequently Asked Questions.
IRS Issues Certification Form for New Hires to Confirm Eligibility
for Benefits
In a previous tax alert, we informed you of two new tax
benefits the HIRE Act provided to businesses hiring workers who were previously
unemployed or working only part time:
-
a
6.2-percent payroll tax incentive that in effect exempts employers from their
share of Social Security taxes on wages paid to these workers, and
-
a
credit of up to $1,000 per employee, to be received for any worker who
qualifies for this payroll tax exemption and who remains on the payroll for 52
consecutive weeks.
The incentive applies to workers hired from
February 4 to December 31, 2010, but only to wages paid to these workers from
March 19 to December 31, 2010. To be eligible for these benefits, the
employer must obtain a statement from each eligible new hire certifying that he
or she was unemployed during the 60 days before beginning work or,
alternatively, worked elsewhere for less than 40 total hours during the 60-day
period.
The IRS has now released Form W-11 (HIRE Act Employee
Affidavit), which employers can use to obtain this statement from new
hires. This form is not to be sent to
the IRS, but kept with the employer's records for presentation upon request.
IRS Releases Draft of Revised Quarterly Payroll Tax Form to Claim
New Benefits
The IRS has released a draft Form 941
(Employer's Quarterly Federal Tax Return) to be used beginning in the second
quarter of 2010 (the quarter ending June 30, due on July 31). This form has new lines to enter the exempt
wages and take the new HIRE Act payroll tax incentives on qualified new hires
(see lines 6a through 6d of the draft form).
The payroll tax incentive is effective for wages paid to
qualified new hires beginning March 19, 2010. Although some of these
wages may be paid in the first quarter, the benefit for them is taken on the
second quarter Form 941. The new draft form contains lines (for use in the
second quarter 2010 filing period only) to claim the incentive for exempt wages
paid from March 19 to March 31 (see lines 12c through 12e). The
first quarter Form 941 will not have a provision for taking the benefit for
these wages; it may only be claimed in the second quarter.
DDK can help your company obtain the maximum advantage
from these tax law changes. Please do
not hesitate to contact us for assistance.
DDK & Company LLP |
