On March 18, 2010 President Obama signed
into law the Hiring Incentives to Restore Employment Act (HIRE) Act
(HR 2847) which is focused on hiring unemployed workers.
You might be asking what that has to
do with me?
We are sending these letters to our tax
and business clients who own a small business as part of our company’s
way to keep you informed on what you can do to save money. As
the new bills come up and new tax law changes come up you will be getting
these letters so you can stay up to date and informed.
Now back to the HIRE act. What
this means for you as an employer is, if you hire a new employee,
after 2/3/10 and before 1/1/11 and that new employee has worked
less than 40 hours during the last 60 day period prior to your hiring
them, you will NOT have to match the 6.2 percent of Social Security
taxes. You DO however have to match the Medicare portion
of their wages. They can make up to $106,800 per employee for
the year and there is no limit on how many employees that you
can hire.
This can also be for rehired employees
who meet the qualifications, even if the employee has been receiving
COBRA assistance. The credit is not permitted if a person is
hired to replace another employee “unless such employee is separated
from the employment voluntarily or for cause”
Also an employee who was a student
may qualify. So if you want to hire a college student part
time and they meet the employment qualifications stated above that is
perfectly okay. The bill also
does not exempt part time workers if they qualify. The bill does
not exempt them from this provision.
Any business, agricultural employers,
tax-exempt organizations and public colleges and universities all qualify.
Household employers and governmental employers cannot claim the new
tax benefit.
This bill allows NO CREDIT
for newly hired family members (related party rules under (IRC Sec 51
(i)(1) referring to IRC Sec 152 (d)(2) Sec A-G) of the business owner
and these are
(A)
A child or a descendant of a child.
(B)
A brother, sister, stepbrother, or stepsister.
(C)
The father or mother, or an ancestor of either.
(D)
A stepfather or stepmother.
(E)
A son or daughter of a brother or sister of the taxpayer.
(F)
A brother or sister of the father or mother of the taxpayer.
(G) A son-in-law, daughter-in-law,
father-in-law, mother-in-law, brother-in-law, or sister-in-law.
Now with all this information I bet you
are wondering what you have to do to SAVE 6.2%.
The requirements are simple.
First
you have a new hire must certify "by signed affidavit," under
penalties of perjury, that he/she has "not been employed for more
than 40 hours during the 60-day period ending on the date such individual
begins such employment." The IRS has released Form W-11 to act
as the Affidavit, as shown on the next pages. The Form is kept in the
employee file, it is not sent to the IRS.
Second
you claim the credit on your 941 form that you send in for the quarter.
If you have someone already hired that qualifies under this you and
you have already matched and paid in the match of the social security
wages you can claim a refund on your 941, or apply to overage to the
next quarter. The 941 has added new boxes and the credit is calculated
in sections 6 a,b and c or the 941 quarterly reporting form.
There is some question out there about
quarterly deposits but I am taking the stand based on John Tuzynski,
Chief of Employment Tax Operations for IRS’s Small Business Division,
who said that employers should reduce their tax deposits to take into
account the exemption (ie don’t over deposit and get a refund) deposit
the amount you are going to owe. This should have begun with the
April tax deposit.
We are not quite through the bill also
did two more things.
First
the Act also extend the Super Section 179 deduction where a business
can expense $250,000 and beginning phasing out when a business buys
more than $800,000 in expensing-eligible assets. So this is still
in effect.
Second Employers will ALSO
receive an INCOME TAX CREDIT (YES YOU CAN RECEIVE BOTH THE SAVEINGS
OF 6.2 PLUS THE INCOME TAX CREDIT), which is either $1,000 for
each qualifying worker hired after 2/3/10 and employed for at least
52 consecutive weeks or 6.2 % of the wages paid to the qualifying worker
for the 52 week period, whichever is less. Wages paid during
the last 26 weeks must be at least 80% of wages paid the first 26 weeks.
The credit will be taken on the 2011
returns. The credit may NOT be carried back to a prior year and
is non-refundable. It does apply against AMT.
I have also taken a seminar on the new
tax care bill and I will get a letter out on that soon.
If you have questions please call Wood-Jones
and Associates, 573-341-5578 we are located at 407 West Highway 72,
Rolla, MO. 65401. If you are talking to other people and
they have questions or need a copy of this letter tell them to call
our office and we will be glad to furnish one to them.
