New Health Care Tax Credit Helps Small Employer
The small
business health care tax credit is designed to encourage small employers to
offer health insurance coverage for the first time or maintain coverage they
already have. It is specifically targeted to help small employers that
primarily employ low and moderate-income workers.
The credit takes effect this year and is generally available to small
employers that pay at least half the cost of single coverage for their
employees in 2010.
For tax years 2010 to 2013, the maximum credit is 35 percent of premiums
paid by eligible small business employers, and 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.
Because the eligibility rules are based in part on the number of FTEs, not
the number of employees, businesses that use part-time help may qualify even if
they employ more than 25 individuals.
Two New Benefits for Employers that Hire and Retain 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,
exempting them from the employer's share of Social Security tax on wages paid
after March 18. In addition, for each qualified employee retained for at least
a year whose wages did not significantly decrease in the second half of the
year, businesses may claim a new hire retention credit of up to $1,000 per
worker on their income tax return.
New hires filling existing positions also qualify but only if the workers
they are replacing left voluntarily or for cause. Family members and other
relatives generally do not qualify.
Employers must get a signed statement from each eligible new hire, that he
or she was not employed for more than 40 hours during the 60 days before
beginning employment with that employer. IRS Form W-11 can be used to meet this
requirement.
Work Opportunity Tax Credit (WOTC) Aids Employers That Hire Certain
Workers
Offers tax savings to businesses that hire employees belonging to various
targeted groups. These groups and the requirements for each of these groups are
listed on Form 8850.
Certification by the state workforce agency is generally required. Normally,
a business must file Form 8850 with the state workforce agency within 28 days
after the eligible worker begins work.
An eligible employer can claim both the WOTC and the new hire retention
credit for the same employee, but not the payroll tax exemption and the WOTC.
Exclusion of Gain on the Sale of Certain Small Business Stock
Investors in qualified small business stock can exclude 75 percent of the
gain upon sale of the stock. This increased exclusion applies only if the
qualified small business stock is acquired after Feb. 17, 2009, and before Jan.
1, 2011, and held for more than five years. For previously-acquired stock, the
exclusion rate remains at 50 percent in most cases.
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. Affected employers can reduce their payroll tax deposits
by the amount of the credit. For details, see
http://www.auxillium.com/ARRA.shtml.
This information was pulled from the IRS website.
