McKonomics

Does Your Organization Qualify for the New Health Tax Credit?

The recently enacted healthcare legislation includes a new tax credit for qualifying small employers. The credit can cover up to 35 percent of employee health insurance costs. It is available for tax years beginning in 2010, and can be claimed for eligible costs incurred before the healthcare legislation became law.

 

Does your company qualify for the credit? As with most tax topics, there's no simple answer. Here are the qualification rules.

 

Basics About the Credit

Hiring Summer Help? Tax Breaks and Rules to Keep in Mind

With the summer now here, you may be expanding your workforce to accommodate increased seasonal demand. Fortunately, there's usually a good source of available labor, including high school and college students, workers recently laid off, and retirees looking to pick up some extra cash. You might even keep summer interns on board longer if they work out to your satisfaction.

 

Be aware that certain legal requirements apply when you add summer help to the staff. In particular, your business must comply with federal and state laws regarding minimum pay standards, workers' compensation and discriminatory practices (see right-hand article). However, if you stay within the legal boundaries, you can realize extra tax benefits for hiring certain workers this summer.

 

The three main tax breaks for employers are the Work Opportunity Tax Credit (WOTC), the payroll tax exemption for previously-unemployed workers and the new tax credit for retaining those workers:

Think You Know What Your Business is Worth?

Many business owners believe they know what their business is worth. Some may have a solid foundation for that belief. However, this belief is often derived from third party information on what they "heard another business sold for." They apply some multiple of revenue or earnings before interest, taxes, depreciation, and amortization (commonly referred to as EBITDA) or other benchmark derived from a transaction to their business and...VIOLA...they know what their business is worth!  In most instances this could not be further from the truth.

 

Without specific knowledge of the facts and circumstances and timing of the transaction, as well as the motivation of BOTH the buyer and seller, you will have a cloudy picture of value at best. We firmly believe that the value of any business cannot even begin to be determined until you can answer a few simple questions we all learned in our elementary school English classes: Who, What, Where, When, and Why.

Let's look at these questions briefly and see how they can potentially impact the value of a business.

Two Valuable Hiring Incentives

Keeping money in the family is always a worthy goal. If you're a business owner, one way to accomplish this is to hire relatives. As an added bonus, if you act quickly, you might qualify for two temporary payroll tax breaks. Here is what you need to know.

 

Social Security Tax Break for New Hires

 

The Hiring Incentives to Restore Employment (HIRE) Act grants a temporary employer Social Security exemption for wages paid by a qualified employer to an eligible new employee between March 19 and December 31, 2010. Specifically, such wages are exempt from the 6.2 percent employer portion of Social Security tax that your business pays as part of the FICA tax.

SEP IRA - The Basics

Over the past few years, many taxpayers have made the switch from employee to self-employed. Although much can be gained from that change, there are also a few things that can be lost, including being covered by an employer's retirement plan.

 

The SEP IRA is a retirement plan designed to benefit self-employed individuals and small business owners. Sole proprietorships, S and C corporations, partnerships and LLCs qualify.

 

SEP IRA contribution limits

 

In 2010 a SEP IRA has a contribution limit of $49,000. Contributions to a SEP IRA are generally 100% tax deductible and investment earnings in a SEP IRA grow taxed deferred. Withdrawals after age 59 1/2 are taxed as ordinary income. Withdrawals prior to age 59 1/2 may incur a 10% IRS penalty as well as income taxes.