• The HIRE tax credit is a 6.2%  Social Security Tax break, up to the lesser of 6.2% of the employees wages or $1,000. The employer takes the credit on their payroll tax forms, by reducing the employer portion Social Security to zero for eligible employees.
• Then there is a HIRE Retention Credit which kicks in 2011 if a new employee is retain for 52 weeks and does not see a significant change in pay during the second half the year.  It also is the lesser of 6.2% of wages or $1,000.
• Work Opportunity Tax Credit (WOTC) is $40% of the first $6,000 in wages and could be as much as $2,400.  Of course WOTC applies to a specific class of individuals who face difficulties getting into the workforce: Welfare recipients, disabled veterans, residents of certain geographic locales, and disconnected youth-so not all new hires will qualify for WOTC, but some might. 
•  However the HIRE tax credit can not be taken with the WOTC.  But the HIRE Retention Credit can be taken with WOTC. 
• Finally, if an employer was taking the COBRA assistance credit, because they laid of a given employee, and that employee was  laid off for more than the 60-day period, the employer can rehire that employee, who will be eligible for HIRE tax credit too. 

If an employer does hire a new employee that qualifies for HIRE and WOTC its probably a good idea to see which tax credit is the most beneficial to them.  An employer can elect to bypass HIRE in favor of WOTC.  If an employer has already taken HIRE on an employee and decides that WOTC would be a better deal, they need to file an amended employment tax return, 941-x, for each quarter they took the HIRE and repay the social security tax.  Once that is done the employer can take WOTC. 

More information on the HIRE credit.  Employees are to certify that they have not been employed more than 40 hours in the 60 day prior to hire using Form W-11 or comparable document. The 60-day period of unployement must be continuous but can bridge 2009-2010.   The document is to be kept in the employer’s files.  Electronic versions with electronic signatures are valid. Scanned images of signed paper W-11s are valid.  W-11s and equivalent need not be notarized. The W-11 must be signed, completed and in the employer’s hands before the employer can claim the HIRE credit on their form 941.  If the employer realizes they have claimed the credit for an ineligible employee they must amend the 941 on which they claimed the credit and pay the tax.  Temp agencies are eligible for the credit, so if the temp agency claims the credit for a given employee, the employer can not; employers should negotiate with temp agencies to pass the exemption saving through to them.  The credit is only for wages actually paid (not earned) during March 19, 2010 and December 31, 2010. 

In other unemployment news, the COBRA subsidy has been expanded to included employees laid off through May 31, 2010 and goes through December 31, 2010.  Former employees are still only eligible for 18 months of COBRA assistance, but for newly laid off workers, this subsidy is some good news. 

Also the time to close on a home, get an occupancy certificate, and qualify for the Home Buyer’s Credit is extended to August 31, 2010-however the contract still must have been entered into by April 30, 2010. 

As always, small business services and taxation are our business.  If you need help Please give Art & Business Consulting a call.  We would love to engage you as a client.

The usual disclaimers: Although ABC has made every effort to insure the accuracy of Taxes, Tips and Tools, misinformation, disinformation, changes, mistakes, typos and hackers happen, therefore Art & Business Consulting LLC takes no responsibility for any action taken or results based on the information supplied here in. The content of this blog generally applies to business and individual taxation in the United States of America.  Internal Revenue Service Circular 230 Disclosure:  As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement address herein.  Art & Business Consulting LLC currently does not have a certified public accountant, human resource specialist, financial plan advisor or an attorney on staff; this information is purely for educational purposes and not to be construed as legal or financial advice. Art & Business Consulting LLC and its employees, members and associates are not engage to practice law; you always should discuss legal matters with your attorney before talking to anyone else.

e.g.  L-corporation discovers in February that it under-reported and under-paid employment taxes for the 4th quarter of the preceding year.  Since the error was discovered in February the amended return and tax is not due until April 30th.

However, Interest will be charged if you do not file the amended tax return AND pay the taxes by the due date.

NOTE: If you do not pay the taxes before the IRS asks for them, interest will be charged, therefore it is to your company’s advantage to report the error and pay the taxes when the mistake is discovered.

If you need help with this issue or any other, remember, small business services and taxation are our business.  Please give Art & Business Consulting a call.  We would love to engage you as a client.

The usual disclaimers: Although ABC has made every effort to insure the accuracy of Taxes, Tips and Tools, misinformation, disinformation, changes, mistakes, typos and hackers happen, therefore Art & Business Consulting LLC takes no responsibility for any action taken or results based on the information supplied here in.  Internal Revenue Service Circular 230 Disclosure:  As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement address herein.  Art & Business Consulting LLC currently does not have a certified public accountant or an attorney on staff; this information is purely for educational purposes and not to be construed as legal or financial advice.  Art & Business Consulting LLC and its employees, members and associates are not engage to practice law; you always should discuss legal matters with your attorney before talking to anyone else.