Dana S.Beane & Company | SPRING 2010 Newsletter
Dana S.Beane
I'm from the Government and I'm here to help you
Ordinarily that sentence would properly be greeted with a great deal of skepticism. And much of the legislation passed by Congress and the programs implemented by the Government have been targeted toward big businesses: Huge Wall Street investment banks and gigantic automobile companies have received untold billions of dollars in direct bailouts. Main Street businesses, which provide most of the jobs in this country have received very little by way of government support.

It is for that reason we were pleasantly surprised to glean a couple of benefits for small businesses in recent legislation that has been signed into law. Not everyone will qualify and there are specific requirements that must be met. However for those who do, there are significant benefits for doing what you were going to do anyway.
Special Payroll Tax Exemption
Your company or non-profit organization may be eligible for an exemption for the 6.2% of the employer’s portion of social security tax for 2010.

The Hiring Incentives to Restore Employment (HIRE) Act signed by President Obama on March 18, 2010 created two new tax benefits designed to encourage employers to hire and retain new workers. Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2 percent payroll tax incentive, in effect exempting them from the employer’s share of social security tax on wages paid to these workers after March 18. This reduction will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2 percent share of Social Security taxes as well as income taxes. In addition, for each unemployed worker retained for at least a year, businesses may claim a new hire retention credit of up to $1,000 per worker when they file their 2011 income tax returns. You cannot claim both credits for the same employee.

A qualified employee is an employee who:
  • Begins employment with you after Feb 3, 2010 and before Jan 1, 2011.
  • Certifies by signed affidavit (IRS Form W-11), or similar statement under penalties of perjury, that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employee begins employment with you;
  • Is not employed by you to replace another employee unless the other employee separated from employment voluntarily or for cause (including downsizing); and
  • Is not related to you.
We believe that this program may be of great benefit to seasonal employers whose employees have been laid off over the winter months and are now being recalled for the summer season.
Tax Credit for Employee Health Insurance Expense
As many of you are aware, the healthcare bill recently signed into law will require all (or at least most) Americans to be covered by Health Insurance. For small companies (including not for profit entities) that already cover their employees health insurance costs, there is a new credit to help defray the cost. You must have less than 25 full time equivalent (FTE) employees for the taxable year and the average annual wage of your employees must be less than $50,000 per year per FTE. According to the “fine print” you must pay premiums for each employee enrolled in your health care plan an amount which is not less than 50% of the single premium cost of the coverage.

If you qualify, have 10 or fewer FTE’s and if your employees are paid average annual wages of less than $25,000 you may be eligible for a credit of 35% of the costs of health insurance.

If you are a small not for profit entity, you would not ordinarily pay taxes. In this case the credit is realized by reducing the amount of Federal Income Tax withholding and Medicare tax you would otherwise remit on your quarterly Forms 941.

As is often the case, there are number of technical requirements that must be met to be able to benefit from these laws. For some it may be akin to threading a needle and unfortunately many businesses will be able to receive only a partial or no benefit. However, for those who meet the criteria, the rewards can be significant.
To discuss these matters further to determine if your company may be able to benefit from these new laws, please contact Joyce McAdams at 524-0507 ext 12.

For more information also visit https://www.dsbcpas.com/faqtechnical/hireact.html
Dana S. Beane & Company, PLLC, Certified Public Accountants Since 1947,
376 Court Street, Laconia, New Hampshire 03246

© 2010 Dana S.Beane & Company. All Rights Reserved.

Technical References:
IRS Form W-11 
IRS.gov HIRE Act: Questions and Answers for Employers 
IRS Notice 2010-82 - Tax Credit for Employee Health Insurance Expenses of Small Employers (expanded guidance) 
IRS Notice 2010-44 - Tax Credit for Employee Health Insurance Expenses of Small Employers (original guidance) 



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