Posts Tagged ‘Tax Credit’

Time to HIRE?

Wednesday, May 12th, 2010

The Hir­ing Incen­tives to Restore Employ­ment Act (HIRE) was signed in to law by Pres­i­dent Obama on March 18, 2010.  Under the new laws cer­tain employ­ers may ben­e­fit from hir­ing cer­tain kinds of new employ­ees.  The first break elim­i­nates the employer’s por­tion of the Social Secu­rity tax of 6.2%.  If the new employee is kept for 52 weeks a sec­ond tax credit kicks in.  The new tax breaks apply to employ­ees hired after Feb­ru­ary 3, 2010 and before Jan­u­ary 1, 2011.

The FICA tax break only applies to the Employer’s Social Secu­rity por­tion — the employer must still pay the Medicare Tax and col­lect both the Social Secu­rity and Medicare employee portions.

  • The newly hired employee can­not have worked more than 40 hours in the last 60 days  in order to be eli­gi­ble for this tax credit.
  • The employer can­not replace cur­rent employ­ees unless those employ­ees are dis­charged for cause or the employee quits voluntarily.
  • The newly hired employee can­not be related to the employer.
  • The newly hired employee can­not directly or indi­rectly own more than 50% of the company.
  • A qual­i­fied employee may work any num­ber of full-time or part-time hours.

The tax break for March will show up as a credit on the Q2 941; for the rest of the year the employer can take the break into account when mak­ing reg­u­lar pay­roll deposits.  This tax credit CANNOT be taken in con­junc­tion with the Work Oppor­tu­nity Tax Credit (WOTC).  Employ­ers also CANNOT dou­ble up using the FICA Tip Credit either.   The sec­ond half of the credit kicks in after the employer has retained the employee for a year; the tax credit is the lesser of 6.2% of the employee’s wages or $1000.

As eager as an employer might be to take advan­tage of this tax credit, they should not use it as a con­di­tion of hire, which would prob­a­bly be a dis­crim­i­na­tory hir­ing prac­tice.   If an employer decides to hire some­one they should be care­ful about when and whether they ask the employee if they are long-term unem­ployed until after mak­ing a hir­ing deci­sion.  Once they decide to hire some­one then they can ask them to cer­tify that they have not been employed for more than 40 hours in the last 60 days.

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, 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.

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Posted in Business Taxes, HR Info | No Comments »

Individuals — Start Thinking About 2010 Taxes Now

Friday, May 7th, 2010

Did you get a huge tax refund this year?  Most peo­ple feel pretty good about that until they real­ize they gave the gov­ern­ment an inter­est free loan of all that money they just got back. 

If you received sev­eral thou­sand dol­lars back from the IRS this year, you may want to con­sider com­plet­ing a new W-4 (includ­ing the work­sheet), and increase your allowances. Take that “extra money,” stuff it in an inter­est bear­ing sav­ings account and maybe you can earn some inter­est and build that nest egg at the same time. 

Con­versely if you owed the gov­ern­ment money you may want to make adjust­ments as well, espe­cially if you paid a penalty for under­pay­ment of taxes over the year. 

So far the tax brack­ets are very sim­i­lar to last year.  Also the stan­dard deduc­tion is the same except for a mod­est $50 increase for Head of House­hold fil­ers.  The amount for each exemp­tion is also unchanged. 

As in the past the brack­ets for the Earned Income Credit have been adjusted for infla­tion and increased slightly.  The max­i­mum credit is the same for tax­pay­ers with no chil­dren and increased a few dol­lars for peo­ple with children. 

There are some tax breaks that have expired in 2010.

  • The exclu­sion of the first $2400 in unem­ploy­ment income has expired at the end of 2009.  Be sure to include it in your esti­mated tax cal­cu­la­tions for 2010.
  • The sales tax/excise tax dedu­tion for the pur­chase of a new auto­mo­bile pur­chase expired too.
  • So did the increase in the stan­dard deduc­tion for real-estate taxes and losses in a fed­er­ally declared dis­as­ter area. 
  • Time has run out for those wish­ing to obtain the First Time home-buyer credit.  Only tax­pay­ers that entered into a bind­ing con­tract by April 30, 2010 can take the credit IF they close by June 30, 2010.  If a tax­payer takes the credit for a 2010 pur­chase on your 2009 taxes, they may not take it again in 2010. 

Those who got in on the First Time Home­Buyer Credit when it was a $7500 interest-free loan from the gov­ern­ment instead of the tax credit it is today, will have to start pay­ing it back this year (the orig­i­nal “credit” is paid back $500/year for 15 years).  Be sure to include this extra $500 tax into your cal­cu­la­tions for with­hold­ing or esti­mated tax pay­ments for 2010. 

Tax credit that are still around for 2010?

  • The Amer­i­can Oppor­tu­nity Credit for education. The credit (up to $2,500 on the first $4000 of edu­ca­tional expenses in the first 4 years of school),  is not just for tuition any­more, but has been expanded to include books and sup­plies too. 
  • Energy credit for effi­cient doors and win­dows. The tax credit 30% of the cost of the new qual­i­fied doors and win­dows to a max­i­mum $1,500 over the 2-year 2009–2010 tax year period.  If you took the full credit in 2009, you can’t take it in 2010. 
  • Energy credit for alter­na­tive energy such as wind and solar is still 30% of the expen­di­ture, but there is no cap.  You will need to check with the man­u­fac­turer to be sure their equip­ment qualifies. 
  • There is the plug in elec­tric drive vehi­cle credit for qual­i­fied elec­tric vehi­cles pur­chased after Decem­ber 31, 2009 run­ning through 2104.  The credit dis­ap­pears after the first 200,000 vehi­cles per man­u­fac­turer have been sold. 
  • Hybrid Vehi­cle Tax Cred­its are still avail­able through the end of this year. Sev­eral man­u­fac­tures have not yet sold 60,000 cars so they are still avail­able for this tax credit.  Toy­ota, Ford and Honda already have sold 60,000 hybrids and are NOT eli­gi­ble for the credit anymore.

The max­i­mum pre-tax con­tri­bu­tions to var­i­ous retire­ment plans is unchanged, but there is a big change with respect to Roth IRAs.  Peo­ple can con­vert from a tra­di­tional IRA to a Roth IRA regard­less of income in 2010.  Fur­ther­more they can spread the tax result­ing from the con­ver­sion  over 2 years if they chose to do so.   For more infor­ma­tion about pros and cons of a Roth Con­ver­sion, please read the blog, Tra­di­tional IRA to Roth Con­ver­sion in 2010.

There are cer­tain items that have changed in 2010 over the 2009 tax year.  Remem­ber Con­gress has the rest of the year to act on these items and prob­a­bly will. 

  • The estate tax has been repealed.  But you can’t really plan on dying this year anyway… 
  • The AMT patch has not been passed yet; be aware if con­gress doesn’t act then AMT will drop back down to pre-2001 lev­els 33,750 (45,000 Mar­ried Fil­ing Joint). 
  • The phase out  item­ized deduc­tions and exemp­tions for higher income earn­ers has vanished. 

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, 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.

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Change To Arizona Charitable Tax Credit For 2009

Sunday, October 25th, 2009

On 7/10/09 Gov­er­nor Brewer signed HB 2286 which amends ARS 43–1088 regard­ing tax cred­its for con­tri­bu­tions to qual­i­fy­ing char­i­ties.  The law went into effect 9/30/09.

The poten­tial indi­vid­ual income tax credit for vol­un­tary cash con­tri­bu­tions made by the tax­payer dur­ing the tax­able year to a qual­i­fy­ing char­i­ta­ble orga­ni­za­tion is up to $200 in any tax­able year for a sin­gle indi­vid­ual or a head of house­hold & up to $400 in any tax­able year for a mar­ried cou­ple fil­ing a joint return.  The tax-credit has a 5 year carry for­ward. This infor­ma­tion has not changed from the pre­vi­ous years.

The change has to do with the the base­line amount, namely there is no longer a base­line amount from 1996 or any other year.  If the tax­payer donates money to the qual­i­fied char­ity and item­izes their deduc­tions, they are eli­gi­ble to take the credit.

The credit can only be taken if the tax payer item­ized deduc­tions in the tax­able year.

Fur­ther­more, the def­i­n­i­tion of a qual­i­fy­ing orga­ni­za­tion has been expanded.  This still has to be a 501© (3) orga­ni­za­tion or a des­ig­nated com­mu­nity action agency that received com­mu­nity ser­vices block grant monies pur­suant to 42 United States Code sec­tion 9901.  How­ever, a 501© (3) orga­ni­za­tion that spends at least 50% of its bud­get on ser­vices to Ari­zona res­i­dents and their house­holds OR TO CHRONICALLY ILL OR PHYSICALLY DISABLED CHILDREN WHO ARE ARIZONA RESIDENTS are now eli­gi­ble too.  Chron­i­cally ill or phys­i­cally dis­abled as defined in sec­tion 36–262 as chil­dren who are under 21 years of age and whose pri­mary diag­no­sis is a severe phys­i­cal con­di­tion which may require ongo­ing med­ical or sur­gi­cal inter­ven­tion.  Ser­vices to res­i­dents mean cash assis­tance, med­ical care, child care, food, cloth­ing, shel­ter, job place­ment and job train­ing ser­vices or any assis­tance that is rea­son­ably nec­es­sary to meet imme­di­ate basic needs and that is pro­vided and used in Arizona.

The qual­i­fy­ing char­ity MUST be on the Ari­zona Depart­ment of Rev­enue (AZ DOR) qual­i­fied char­i­ties list, posted on www.azdor.gov web­site.  Just because a char­ity has been eli­gi­ble for the char­i­ta­ble con­tri­bu­tions tax credit in the past, do not assume they are qual­i­fied now.  Each char­ity has to re-certify with the state, and most prob­a­bly will, but you should go to the AZ DOR web­site and con­firm that they are still eli­gi­ble in 2009.

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.   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.

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