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The IRS has released the new form that employers will need to claim the newest tax exemption for hiring unemployed workers. This new exemption is part of the Hiring Incentive to Restore Employments (HIRE) Act signed by the president in March. To qualify, employers must complete the new Form W-11 and submit it with statements from the employee swearing that they were unemployed or employed for less than 40 hours a week at least 60 days prior to the hire. Employers can then claim the credit on their 941 quarterly tax return form which has been revised for use starting with the second quarter of 2010. A draft of the revised form can be found here, and the permanent form will be released soon.
The HIRE Act is designed to help encourage employers to hire unemployed individuals by offering this 6.2% payroll tax credit, which is basically the employer’ share of social security. The employee’s share is still paid and it does not affect the employee’s future social security earnings. If you own a business, do you think this is enough to encourage you to hire unemployed individuals? Is it just a band-aid over a larger wound?
Two new tax incentives designed to encourage employers to hire the unemployed became effective March 18. The first entitles employers to a 6.2% payroll tax deduction – basically equal to the employers’ share of Social Security tax. This would not effect the employee’s future SS benefits because the employer would still pay in the employee’s portion after deducting it from their check as normal. The second break includes a general tax credit for businesses of up to $1000 when they file their 2010 return in 2011.
In order to qualify for the credit, businesses have to prove that the person they hired was either unemployed or worked less than 40 hours a week in the 60 days prior to the hiring. The IRS is currently developing a form that employees can complete to verify this information. All types of businesses, including tax exempt non-profits, qualify for this benefit. Only household employees are exempt. Check back with the IRS website in the next few weeks as more information and required forms will be available.
For those who are interested in donating to relief efforts in Haiti, the IRS wants you to know that in order to claim those donations on your 2009 return, the donations must be made by the end of this month (Feb. 28). A special provision was enacted by Congress allowing people to claim donations made to Haitian relief efforts in 2010 on 2009 tax returns in order to encourage people to give to the effort. Relief groups are still in great need of assistance, so make your donation before Sunday and you can include it on your 2009 return as a deductible charitable contribution. See this page on the IRS website for more information.
Congress is in the midst of reviewing a new jobs bill that includes measures desired by both Republicans and Democrats – measures designed to get more unemployed Americans back in the workforce. The bill has a few new ideas for creating jobs, including exempting businesses from paying their share of the Social Security tax on a person hired after being unemployed for at least 60 days. Senators argue that this is a simpler, faster way to give employers credit for hiring people. The rest of the bill includes measures that were promised last year but never got passed including renewal of previous tax breaks, extension of unemployment benefits, and a delay in the reduction of Medicare payments to doctors.
Some think this bill is pretty watered down and doesn’t really offer any signifcant changes in either tax or law or encouragement for hiring. But it may be the only thing that has a chance to pass in this extremely divided Congress. And isn’t something better than nothing? Senators are saying that this bill could result in 50,000 to 80,000 more jobs this year. And at this point, when unemployment continues to be high and many businesses are suffering financially and unable to hire, we’ll take anything we can get.
Everyone is looking for ways to help the people of Haiti deal with the devastating earthquake of last week that has left thousands dead and millions homeless. The US Congress wants to encourage people to give to the relief efforts in the next few weeks and has given a little incentive to get more people to do that. The House passed a resolution yesterday that will allow people who donate to relief funds for Haiti to claim that donation on their 2009 tax return instead of waiting to claim it in 2010. The Senate is expected to quickly pass the measure as well. A similar law was enacted after the tsunami tragedy in December of 2004. Relief organizations like the Red Cross are hoping that this will encourage people to make donations as soon as possible. Despite the rumours concerning difficulties that they have faced in getting relief to the people, these agencies want to ensure Americans that what they give is desperately needed and is making a difference. For more information on how you can donate, visit the American Red Cross website.
Are you one of the millions of people who plan to take advantage of the home buyer tax credit this year? Be aware that there is additional information you will need to provide to the IRS to prove your eligibility. The IRS is trying to crack down on the rampant fraud that has been associated with this credit. They recently released the new Form 5405, First Time Homebuyer Credit and Repayment of Credit Form which must be completed and submitted, along with the required documentation. The IRS will begin reviewing these returns in mid-February after the necessary checks are put in place to make sure filers are complying with the new laws. The IRS warns taxpayers that the processing of these returns might take an additional 2-3 weeks. However, you can help ease and speed up the processing of your credit if you will make sure you have the following documentation.
If you purchased a home for the first time and plan to claim the credit on your return this year, make sure you have the following documents listed on the IRS website to send along:
- A copy of the settlement statement showing all parties’ names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
- For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
- For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
If you had lived in your previous home for more than 5 years and purchased a new home this year, the IRS suggests, in addition to the documents listed above, to also include the following to speed processing:
- Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
- Property tax records or
- Homeowner’s insurance records.
For more information, visit the Home Buyer Credit page on the IRS website.
Well, it’s finally here! Tax time is upon us, and soon all those lovely forms with names like W2, 1099, 1040, etc. will start to invade your brain. Time to buckle up and get the information you need to be prepared for this tax year. The IRS has grouped all of their helpful links on to one page for Tax Season 2010. On this page you can find links for tax law changes, information on tax breaks and credits that are new this year, reporting and filing tips and options, info on email and other scams, and links to helpful YouTube videos like this one:
We will continue to post updates from the IRS and other important tax information and tips throughout the weeks leading up to April 15. As always, do not hesitate to contact our office with any tax questions. Good luck!
In a giving mood this time of year? If you plan to make charitable contributions that will apply to your 2009 tax return, there are some changes for this tax year that you should know about.
The IRS Website’s most recent article provides some helpful highlights of the recent changes and things to keep in mind when making personal or business contributions before December 31. Here are some highlights:
1. IRA owners, age 70 1/2 or older, can transfer up to $100,000 to an eligible charity tax-free.
2. Donated household items and clothing must be in good working condition or better unless the donation is worth over $500 and there is written qualified appraisal.
3. Cash donations must have a written receipt from the receiving party detailing how much was given and on what date.
4. Contributions are deductible in the year they are made only. Charitable donations are available only to those who itemize deductions. Make sure you have careful records and receipts of any donations made.
For more information, visit the IRS Website or contact our office.
The IRS wants to help you cut your tax bill by taking advantage of new tax breaks and understanding the changes for the 2009 tax year. To do that, they have just released the newly revised Publication 17: Your Federal Income Tax. This 308 page guide has information on all the new tax deductions and breaks that are part of the American Reinvestment and Recovery Act as well as basic tax filing info and tips on reporting income, taking deductions, and other important topics. It has more than 6000 interactive links that will take you to pages that can provide more information. If you don’t have internet access or want a printed copy, you can get one free from the IRS by calling 1-800-TAX-FORM (829-3676). Printed copies will be available in January.
The IRS website has lots of other helpful forms and information for preparing your 2009 taxes. The American Recovery and Reinvestment Act of 2009 Information Center also provides more detailed information on the recovery act and its tax changes and benefits. New updated 2009 forms are being added all the time, so check back frequently.
The IRS announced the new 2010 standard mileage rates for deducting costs of operating a vehicle for business, medical, moving, and charitable work. The new rates are as follows:
1. $.50 per mile for business
2. $.16.5 per mile for medical or moving usage
3. $.14 per mile for miles driven for a charitable organization
The IRS says rates are slightly lower than 2009 which reflects lower costs of transportation. The IRS website further explains how rates are calculated and used:
“The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.”
