The Internal Revenue Service has released IR-2010-69 which encourages small businesses to take advantage of tax incentives included in recently enacted federal legislation. The release, in recognition of National Small Business Week, includes a summary of a variety of tax-saving opportunities as well as resources. Summaries and links to resources are provided below:
Health Care Tax Credit
The Affordable Care Act is designed to encourage small employers to offer health insurance coverage for the first time or maintain existing coverage. The Credit is generally available to small employers that pay at least half the cost of single coverage for employees in 2010.
For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers. The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers with more than 25 FTEs or with average wages of more than $50,000.
Answers to Frequently Asked Questions
Benefits for Hiring and Retaining Recently Unemployed
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. This in effect exempts them from the employer’s share of Social Security tax on wages paid to these workers after March 18. Further, if the qualified employee is retained for at least a year and whose wages did not significantly decrease in the second half of the year, a qualifying business may claim a new hire retention credit up to $1,000 on their tax return.
Form W-11 – fulfills required signed statement regarding eligibility
Answers to Frequently Asked Questions
Work Opportunity Tax Credit
This credit offers tax savings to business that hire employees belonging to various target groups. Groups include: people ages 18 to 39 living in designated communities in certain states and D.C., recipients of various types of public assistance, certain veterans, ex-felons, and certain youth workers.
Form 8850- filing with state workforce agency within 28 days after eligible worker begins work
An eligible employer can claim both the WOTC and the new hire retention credit for the same employee. However, an employer may not claim both the payroll tax exemption and the WOTC for the same employee. Therefore, any employer that chooses to apply the exemption to wages paid to a qualified employee may not receive the WOTC on any wages paid to that employee during the one-year period beginning on the employee’s hiring date.
Gain Exclusion on Sale of Certain Small Business Stock
Investors in qualified small business stock can exclude 75 percent of the gain upon sale of stock if acquired after Feb 17, 2009 and before Jan. 1, 2011 and is held for more than five years. If acquired prior to these dates, the exclusion rate generally remains at 50 percent.
COBRA Credit
Employers that provide the 65 percent COBRA premium subsidy to eligible former employees can claim credit for this subsidy on their quarterly or annual payroll tax returns. To help avoid imposing an unnecessary cash-flow burden, affected employers can reduce their payroll tax deposits by the amount of the credit.
Other Resources: