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Business
Tax Changes in the 2010 Hire Act
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The following summarizes
the key tax changes affecting business in the recently enacted Hiring
Incentives to Restore Employment (HIRE) Act. Please call our
office for details of how the new changes may affect your specific
business.
Extension of enhanced small business expensing (Section 179). The
new law extends, for one year, the enhanced expensing rules, which
allow qualifying businesses the option to currently deduct the cost of
business machinery and equipment. For tax years beginning in
2010, the maximum amount that a business may expense is the same as in
2009, $250,000. This amount begins to phase out when a business
buys more than $800,000 of expensing-eligible assets.
Payroll tax holiday and $1,000 credit for employers who hire unemployed
workers. The new law exempts a private sector employer that hires
a worker who had been unemployed for at least 60 days from having to
pay the employer's 6.2% share of the Social Security payroll tax on
that employee for the remainder of 2010. The maximum payroll tax credit
is $6,621 per employee. As an additional incentive, if an employer
keeps a qualifying employee on payroll for a continuous 52 weeks, the
employer is eligible for an additional non-refundable income tax credit
of up to $1,000. This credit is taken on their 2011 tax return.
In order to be eligible, the employee's pay in the second 26-week
period must be at least 80% of the pay in the first 26-week period.
Workers hired after the date of
introduction of the legislation (February 3, 2010) are eligible for the
payroll tax forgiveness and the retention bonus, but only wages paid
after the date of the new law's enactment (March 18, 2010) receive the
exemption for payroll taxes.
Here are some additional features of
the new hiring incentive:
- The
tax benefit generally applies only to private-sector employment,
including nonprofit organizations and public higher education
institutions would qualify.
- There
is no minimum weekly number of hours; the new employee must work
for the employer to be eligible.
- For
workers that would otherwise be eligible for the "Work
Opportunity Tax Credit," the employer must select one benefit
or the other for 2010 - no double dipping.
An employer can't claim the new tax breaks for hiring family
members.
- A
worker who replaces another employee who performed the same job
for the employer is not eligible for the benefit, unless the prior
employee left the job voluntarily or for cause.
- For
the hiring to qualify, the new hire must sign an affidavit, under
penalties of perjury, stating that he or she has not been employed
for more than 40 hours during the 60-day period ending on the date
the employment begins.
- The
payroll tax credit for the first quarter 2010 wages is taken on
the second quarter payroll tax return.
- The
Act creates a similar new set of rules permitting a payroll tax
holiday for railroad retirement tax purposes.
- The
credit for retaining qualifying new hires is the lesser of $1,000
or 6.2% of the wages paid by the taxpayer to the retained worker
during the 52 consecutive week period.
We hope this information
is helpful. If you would like more details about these provisions or
any other aspect of the new law, please do not hesitate to contact our
office at (315) 234-1100.
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Bowers & Company, CPAs, PLLC
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