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.

Leave a Reply

Your email address will not be published. Required fields are marked *