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HEALTH INSURANCE CREDIT FOR SMALL BUSINESS

Many small businesses and tax-exempt organizations that provide health insurance coverage to their employees now qualify for a special tax credit.
Included in the health care reform legislation - the Patient Protection and Affordable Care Act - which was approved by Congress and signed by President Obama on March 23, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.
In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.
The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.
The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low- and moderate-income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.
The maximum credit goes to smaller employers - those with 10 or fewer FTEs - paying annual average wages of $25,000 or less.
Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.
The IRS will use postcards to reach out to millions of small businesses that may qualify for the credit. The postcards will encourage small business owners to take advantage of the credit if they qualify.
For more information about the credit, please call us or visit the IRS Web site, IRS.gov.

Spring Cleaning: Tax Records You Can Throw Away

Spring is a great time to clean out that growing mountain of tax and financial papers that clutters your home and office. Here's what you need to keep and what you can throw out without fearing the wrath of the IRS.

Let's start with your "safety zone", the IRS statute of limitations. This limits the number of years during which the IRS can audit your tax returns. Once that period has expired, the IRS is legally prohibited from even asking you questions about those returns.

The concept behind it is that after a period of years, records are lost or misplaced and memory isn't as accurate as we would hope. There's a need for finality. Once the statute of limitations has expired, the IRS can't go after you for additional taxes, but you can't go after the IRS for additional refunds, either.

The Three-Year Rule

For assessment of additional taxes, the statute of limitation runs generally three years from the date you file your return. If you're looking for an additional refund, the limitations period is generally the later of three years from the date you filed the original return or two years from the date you paid the tax. There are some exceptions:

• If you don't report all your income and the unreported amount is more than 25% of the gross income actually shown on your return, the limitation period is six years.

• If you've claimed a loss from a worthless security, the limitation period is extended to seven years.

• If you file a 'fraudulent' return, or don't file at all, the limitations period never begins to run. The IRS can, in fact, get you at any time.

• If you're deciding what records you need or want to keep, you have to ask what your chances of an audit are. A tax audit is an IRS verification of items of income and deductions on your return. So you should keep records to support those items until the statute of limitations runs out.

Assuming that you've filed on time and paid what you should, you only have to keep your tax records for three years, but some records have to be kept longer than that.

Remember, the three-year rule relates to the information on your tax return. But, some of that information may relate to transactions more than three years old.

Here's a Checklist Of The Documents You Should Hold Onto.

1. Capital gains and losses. Your gain is reduced by your basis -- your cost (including all commissions) plus, with mutual funds, any reinvested dividends and capital gains. But you may have bought that stock five years ago and you've been reinvesting those dividends and capital gains over the last decade. And don't forget those stock splits.

   So you don't ever want to throw these records away until after you sell the securities. And then if you're audited, you're going to have to prove those numbers. So you'll need to keep those records for at least three years after you file the return reporting their sales.

2. Expenses on your home. Cost records for your house and any improvements should be kept until the home is sold. It's just good practice, even though most homeowners won't face any tax problems. That's because profit of less than $250,000 on your home ($500,000 on a joint return) isn't subject to taxes under tax legislation enacted in 1997.

   If the profit is more than $250,000 ($500,000 on a joint return), or if you don't qualify for the full gain exclusion, then you're going to need those records for another three years after that return is filed. Most homeowners probably won't face that issue thanks to the 1997 tax law, but better safe than sorry.

3. Business records. I must warn you: Business records can become a nightmare. Non-residential real estate is now depreciated over 39 years. You could be audited on the depreciation up to three years after you file the return for the 39th year. That's a long time to hold onto receipts, but you may need to validate those numbers.

4. Employment, bank and brokerage statements. Keep all your W-2s, 1099s, brokerage and bank statements to prove income until three years after you file or longer if you need to. Don't even think about dumping checks, receipts, mileage logs, tax diaries and other documentation that substantiate your expenses.

5. Tax returns. Keep copies of your tax returns as well. You can't rely on the IRS to actually have a copy of your old returns. I recommend my clients keep tax records for 6 years.

   The bottom line is that you've got to keep those records until they can no longer affect your tax return, plus the three-year statute of limitations.

6. Social Security Records. You will need to keep some records for Social Security purposes, so check with the Social Security Administration each year to confirm that your payments have been appropriately credited. If they're wrong, you'll need your W-2 or copies of your Schedule C (if self employed) to prove the right amount. Don't dump those records until after you've validated those contributions.

   You can confirm your payments and estimate your future benefits by filing Form SSA-7004 with the Social Security Administration. You can download the form, or apply online.

While it may bring you some psychological satisfaction to review your financial journey from poverty to wealth, if you find some tax returns that were filed with Roman numerals, it's probably time to clean out your attic.

Tax Alert - New Federal Hire Act

NEW FEDERAL HIRE ACT SIGNED BY PRESIDENT OBAMA, March 18, 2010

Today the President signed into law the Hiring Incentives to Restore Employment (HIRE) Act, which focuses on the hiring of unemployed workers.

The HIRE Act has provisions that impact employers, including a payroll tax exemption, and increased tax credits for employers that meet certain eligibility requirements. Employers can immediately enhance their cash flow by retaining the employer portion of the Social Security tax ordinarily remitted.

HERE ARE THE KEY ASPECTS OF THE NEW HIRE ACT.

Social Security Tax Exemption The 6.2% Employer Social Security Tax exemption applies to 2010 wages paid after March 18 and before January 1, 2011, to individuals hired after February 3, 2010, who were previously unemployed for at least 60 days and who do not exceed the $106,800 Social Security wage base.

• Employers can save the 6.2% Employer Social Security Tax , whether they hire a $20,000 worker, or a $70,000 worker. This tax relief begins accruing with each payroll processed.
  
  
• The earlier in the year the employers hire new workers the greater the tax benefit will be. For example, a $70,000 worker hired on April 1 saves an employer about $3,255 in taxes. Delaying the hiring until July 1 would reduce savings to about $2,170
  
  
• This exemption has no cap or limit as to the total amount of tax benefits that can be claimed by an employer. Employers can save up to $6,622 per qualifying worker, whether they hire one worker or hundreds of new workers.

Tax Credit Employers will receive an income tax credit, which is either $1,000 for each qualifying worker hired after February 3, 2010, and employed for at least 52 consecutive weeks, or 6.2% of wages paid to the qualifying worker over the 52-week period, whichever is less. Wages during the last 26 weeks must be at least 80 percent of wages paid for the first 26 weeks.

• New hires must certify, under penalties of perjury, that he/she has "not been employed for more than 40 hours during the 60-day period ending on the date such individual begins employment."

• Employers cannot use the 6.2% Employer Social Security Tax exemption nor the retention tax credit if a person is hired to replace another employee "unless such other employee is separated from employment voluntarily or for cause."

• New hires must be hired after Feb 3, 2010 and be employed for at least 52 consecutive weeks.

Other Business Incentives For tax years beginning in 2010, the maximum section 179 deduction increases to $250,000 and boosts to $800,000 the beginning of the investment based phase-out amount.

RECOMMENDATIONS.

1. Ensure you have procedures and documentation in place to support new hire qualification for this exemption and credit

2. Ensure your payroll system has been updated to take into account the exemption for employer paid social security on new hires

3. Interview new hires thoroughly to ensure they meet the new hire qualification requirements

4. Look at converting contract employees to new hires

5. Good time to look at outsourcing your payroll

Payroll savings CALCULATOR provided by ADP

How we can help.

We provide full-service payroll/HR service. Our payroll platform is already fully compliant with all aspects of the Federal Hire Act of 2010. We have documentation in place to support the new Tax Credit employee-required affidavit certification of prior employment. Our full service payroll offering includes payroll processing, reporting, tax deposits, and HR related services. Please visit our website to fill out the form to register for a free analysis of your payroll, accounting and tax needs. www.gurrcpa.com/alert.php

April 15 is Almost Here

April 15 is less than a month away. Click on the link below to make an appointment.

http://www.gurrcpa.com/appointments.php

What to bring to your tax appointment:

• Income Documents
• Business Document
• Deductions

Contact us now if you have any questions 801-225-9411

Contact us:www.gurrcpa.com/contact.php