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.