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Tax Law Changes for Employers
- Employers Hiring Tax Incentives
- Qualified new hire:
- Must sign affidavit on new IRS Form W-11 under penalties of perjury that he qualifies as a new hire…has not worked a total of 40 hours over 60 days prior to hire date.
- Begins work for a qualified employer which is not a governmental entity (exclusive of a public higher education institute).
- Not employed to replace another employee of employer unless such employee separated for cause or voluntarily quits work.
- Is not a related party.
- Applies to all new hires that began work after 2/3/10 and before 1/01/11, whether full time or part time.
- Benefit to employer….does not pay 6.2% social security tax for wages paid to qualifying employee beginning 3/19/10 and ending 12/31/10.
- If employee qualifies for New Hire Credit and Work Opportunity Tax Credit, employer has election to claim only one credit, not both.
- Business credit for retention of new hire for one year,
- Employer may claim a general business income tax credit equal or lesser than $1,000 or 6.2% of wages for each qualified new hire who:
- Is employed on any date during tax year after 3/18/10.
- Continues to be employed for a period not less than 52 consecutive weeks.
- Receives wages during last 26 weeks of such period that are at least 80% of such wages during first 26 weeks.
- Prospective planning points:
- Prospective employee who is out of work and looking for a job needs to work only 40 hours during 60 day period prior to begin working.
- Prospective employee should find out if employee qualifies for Work Opportunity Tax Credit, which may provide a better tax credit to employer and needs to be certified at time hired.
- The credit may be claimed on a return for calendar year 2011 or any fiscal year ending 3/31/11 or later.
- Employer tax credit for company paid health related insurance,
- Small businesses who pay for 50% or more of the cost of health related premiums (i.e. – health insurance as well as dental, vision, long-term care, etc) qualify for a tax credit for 2010.
- The credit ranges from 9% for company with 15 or less employees and average wages of $35,000 to 35% for a company with 10 or fewer employees and average of $25,000. For tax exempt organizations, the credit is limited to 25%
- The 35% credit percentage decreases rapidly for employers with more employees and higher average wages.
- Insurance premiums paid for owners and related parties do not qualify for the credit.