You are currently browsing the tag archive for the ‘tax benefits’ tag.
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 of you that are actually done with your taxes this year – frustrated? Disappointed? Refund not as big as you thought? Did you end up owing money? What went wrong? When people find that their returns did not turn out they way they expected, it is often because they did not realize how changes in the withholding tables for 2009 and various other tax credits ended up affecting them. You may have seen more in your take home pay, but without adjusting your allowances, it meant you ended up owing more when tax time came around.
It is always advisable to review your W4 form at least once a year to make sure the number of exemptions is correct and how you want them to be. Sometimes it is even good to do this several times a year as laws do change. If you feel you are not having enough taken out, you can choose to have additional money withheld every month. But be careful – you don’t want to have too much withheld and give the government an interest free loan of your money.
It is best to look at past tax amounts and try to have an amount taken out as close as possible to the amount you owe. Sure a big refund is nice, but you could withhold that money yourself in a high interest bank account and end up better off. As always, the advice of your accountant or bookkeeper is invaluable in any situation where you need to make a decision about changing tax information. Ask about what the new laws are and how they will affect you and your family. An informed tax payer is a much more relaxed and happy tax payer come this time next year.
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.
Unemployment is still a serious problem in this country, with one out of every 10 Americans currently without jobs. In an attempt to encourage small businesses to hire more people, President Obama proposed, in his State of the Union address, some new tax credits for businesses that bring new people in. Under the proposal, businesses would receive a $5000 tax credit for each new employee they hire this year. The total amount of credit is capped at $500,000 to ensure the most of the credit benefits small businesses. Start-ups will be eligible for half the credit.
Also, any company that increases pay for hours for their current employees will be reimbursed for Social Security taxes paid on the increases. The President also vowed again to eliminate capital gains tax on small business investments and a new tax incentive for investing in new plants and equipment. It will be interesting to see what happens to these proposals in reality in the next year or so.
President Obama is expected to, in his State of the Union address on Wednesday, propose some new tax initiatives designed to help the middle class in the current financial downturn. The President’s “Middle Class Task Force”, which has held several meetings around the country and at the White House, has five new recommendations that the President will be sharing including:
- Increase in the Child and Dependent Care Tax Credit from 20% to 35% for families making $85,000 or less
- Increase child care funding for lower-income families
- Limiting federal student loan payments to 10% of a student’s income after a basic living allowance
- Requiring all employers to give employees an option of enrolling in a direct deposit IRA
- Expand tax credits to match retirement savings and enacting new safe guards to protect them
These new elements are to be part of the 2011 fiscal budget which will be distributed Feb. 1. Many analysts are saying that middle class themes are expected to be prevalent in the new budget and in the President’s focus in the next year.
Looking for ways to get your tax refund faster this year? The IRS encourages people to e-file – it is more accurate and you can usually receive your refund within 10 business days versus the 4-6 weeks it takes with a paper return. The IRS has also teamed up with several tax prep software companies to offer free tax preparation and e-filing for those that qualify. If your gross adjusted income is $57,000 or less, you can visit www.irs.gov/freefile and choose from several tax prep software programs that will guide you step by step through the new tax credits and deductions so you don’t miss anything. Then you can e-file for free or print out your return and file for the cost of postage only. However, if you plan to take the new home buyers credit this year, you will have to file a paper return because of the required documentation (visit our previous entry Tax Form Now Available for Home Buyer Credit).
If you don’t qualify for the free program, the software companies are offering lots of promotions to make their programs more affordable – check out your favorite office supply store or visit the company websites. The IRS is really encouraging all filers to use some kind of assistance this year due to all the changes and new tax credits that were passed with American Recovery and Reinvestment Act. If you don’t feel comfortable using a software program or you feel your return is too complex, please contact our office so we can discuss with you how we can help you get your taxes done quickly and correctly.
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.
