Possible tax-break bonanza for Cape businesses that hire a lot of students and other seasonal workers:
Employers who hire people who worked for a total of less than 40 hours in the previous 60 days can get an exemption from the 6.2% social security tax that would otherwise be due on the employee's wages. This is effective for wages paid from March 19, 2010 to December 31, 2010. The employee must start working after February 3, 2010.
People who were in school during the previous 60 days are not disqualified, and there is no minimum age.
New hires who qualify must fill out form W-11 (or equivalent) to enable the employer to take the credit. The credit will be claimed on form 941 starting with the second quarter of 2010.
The exemption is for the employer's matching 6.2% and does not affect the 6.2% withheld from the employee's pay.
Friday, May 14, 2010
Saturday, May 8, 2010
Credit for employers who offer health insurance
The IRS recently sent out postcards to employers who might qualify for a new credit established by the new health care law. It is a credit worth up to 35% of health insurance premiums paid by employers who have less than 25 “full time equivalent” employees and pay an average of less than $50,000 per year to each employee.
The full 35% credit will be realized only by employers with less than 10 “full time equivalent” employees who are paid an average of less than $25,000 per year. The credit is gradually reduced above that level.
“Full time equivalent” means that you have to divide the total hours worked during the year by part-timers by the number of hours they would have worked if they were full time. (The simplest example is that is you have two employees who each work 20 hours per week all year, you have one full time equivalent employee.)
The average wages are determined by dividing the total wages by the number of full time equivalent employees.
To qualify, the employer must pay at least 50% of covered employees’ health insurance premiums, if they have coverage as a single individual. If they are on a family plan, the employer only has to pay the amount equal to 50% of the single plan.
The credit has a number of other complicated rules, as you may have guessed.
The credit is taken on the employer’s annual income tax return. For example, a sole proprietor will take the credit on form 1040. For a corporation that files form 1120, the credit will be taken on that form.
Tax-exempt organizations can also claim the credit. For them, it is a refundable credit (subject to certain limitations).
For employers other than non-profits, the credit is not refundable; it can only reduce the income tax down to zero.
The full 35% credit will be realized only by employers with less than 10 “full time equivalent” employees who are paid an average of less than $25,000 per year. The credit is gradually reduced above that level.
“Full time equivalent” means that you have to divide the total hours worked during the year by part-timers by the number of hours they would have worked if they were full time. (The simplest example is that is you have two employees who each work 20 hours per week all year, you have one full time equivalent employee.)
The average wages are determined by dividing the total wages by the number of full time equivalent employees.
To qualify, the employer must pay at least 50% of covered employees’ health insurance premiums, if they have coverage as a single individual. If they are on a family plan, the employer only has to pay the amount equal to 50% of the single plan.
The credit has a number of other complicated rules, as you may have guessed.
The credit is taken on the employer’s annual income tax return. For example, a sole proprietor will take the credit on form 1040. For a corporation that files form 1120, the credit will be taken on that form.
Tax-exempt organizations can also claim the credit. For them, it is a refundable credit (subject to certain limitations).
For employers other than non-profits, the credit is not refundable; it can only reduce the income tax down to zero.
Sunday, May 2, 2010
Times A-Changin'?
According to a recent (last month) report in The Economist, the US economy is undergoing a transformational change that will make it more viable in the long run. There will be more exporting and less production targeted for domestic consumption, they say. We will change our spendthrift ways and start saving more. There are already signs of that, since the recession and last year's meltdown have scared us straight.
Apparently not all economists agree, but if true, it is big news and perhaps something for optimists to hang their hats on in their persistent belief that all is not lost for the American economy. The title of the lead editorial on the subject is: "Hope at Last."
Apparently not all economists agree, but if true, it is big news and perhaps something for optimists to hang their hats on in their persistent belief that all is not lost for the American economy. The title of the lead editorial on the subject is: "Hope at Last."
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