Tax Breaks From Hiring the Unemployed
One of the many benefits for businesses that retain consultation from enrolled agents is keeping up with new tax legislation. Knowing about added tax laws permits a business to capture financial advantages. The continuing education enrolled agents complete annually is always updated to changes in the income tax statutes.
Among the important tax laws implemented in 2010, two provide benefits to businesses that hired new employees. Like all matters with the IRS, there are specific rules to follow. This is common ground for tax professionals with enrolled agent certification. Obtaining beneficial tax treatment often requires professional assistance to understand the rules. From the beginning of preparation for enrolled agent careers there is training to gain familiarity with IRS procedures.
In order to qualify for the employee tax breaks, a business must have a new employee who had previously worked fewer than 40 total hours during the 60 days prior to being hired. In addition, hiring relatives for employment doesn’t qualify for the tax breaks. A business can’t terminate an existing employee in order to hire a new one simply to claim the credit. But the tax break is available to businesses replacing voluntarily departed employees or those terminated for cause.
Otherwise, there are no other restrictions. Workers are not required to have even been previously employed. A business is eligible for the tax breaks from hiring a recent college graduate with no employment history. The hired workers can even be former employees who were part of a previous lay off-as long as they were unemployed for 60 days.
The first tax advantage is that employers may offset their portions of Social Security tax on the wages of an eligible new employee. This covers wages paid from March 19 to December 31 of 2010. The employee share of Social Security tax is still withheld from wages and remitted by employers. Businesses who failed to correctly account for this benefit when filing quarterly wage reports can amend them to receive a refund.
The second tax break allows a business credit for each new worker still employed after one year. The employee’s wages must have not decreased significantly during the year. The credit is the lower of $1,000 or 6.2 percent of the employee’s wages. Since eligible employees hired in 2010 will complete one year of service in 2011, this tax credit is captured on 2011 tax returns filed in 2012.
Action was required before the end of 2010 in order to receive these tax breaks. But many business that added staff during that year are not aware of the tax legislation or how to capture the benefits. Business that find an enrolled agent have assurance of gaining from these new laws and all other types of tax advantages.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
