New tax laws could help businesses save thousands on their 2010 taxes. These tax breaks encourage companies to hire employees, buy equipment, and offer healthcare to their employees.
Hiring Incentives to Restore Employment Act provided a payroll tax exemption to help with the hiring and retention process. The new law allows businesses to exempt the 6.2% Social Security payroll tax on wages paid between March 18th, 2010 and December 31st, 2010, for every new employee who meets the following criteria.
* Hired after February 3, 2010, and before January 1, 2011
* Either unemployed during the 60 days before being hired or worked less than 40 hours in total during that 60-day period
* Not a family member or other relative
This exemption does not apply to wages that are paid to employees hired to replace an existing worker unless the worker leaves voluntarily or is terminated for cause.
Employers are required by law to retain either Form W-11 (or an affidavit) signed by the employee as proof that they meet the criteria. You can claim the exemption on the quarterly Form 941.
Employers who retain their employees for 52 consecutive working weeks without reducing wages in the second half the year can claim a new-hire retention credit up to $1,000 per worker for 2011 returns.
HIRE Act 2010 also extended Section 179’s first-year cap on depreciable property. The $250,000 limit will not be reduced to $125,000, but it will remain at $250,000. 2010 saw the extension of the $800,000 equipment cost limit.
The Patient Protection & Affordable Care Act, which was passed into law March 23, 2010, gives tax-exempt businesses and organizations the opportunity to receive a tax credit when providing or maintaining health insurance for employees.
Jessi Dolmage spokeswoman for 2nd Story Software makers of TaxACT. She explained that businesses with 10 full-time equivalent employees and an average annual salary $25,000 or less can get the maximum credit of 35%, while tax-exempt companies can get 25%. Employers are required to pay half of the cost for single coverage. As the average salary and number of eligible employees rise, the credit will decrease. The credit will eventually be phased out to 25 equivalent full-time employees earning $50,000 per year or less. Family members do not qualify.
2014: The maximum credit amount for businesses will be increased to 50% of the premiums and for tax-exempt organisations it will rise to 35 percent.
The credit can be claimed by businesses under the general credit for business. Instructions will be sent to tax-exempt entities by the IRS.
You can find more information about HIRE Act, the health care credit, and other tax incentives for businesses at www.irs.gov.
TaxACT Business Editions guide you step by step through credits and deductions in order to reduce your tax liability. TaxACT will answer simple questions and then calculate and complete the forms. TaxACT Free Federal Edition is available to help you prepare, print, and e-file a personal tax return.
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