Payroll Tax Holiday

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Urgent WOTC Update – Inform Your Republican Senators Now

Tuesday, December 6th, 2011

Our friend Paul Suplizio, President of the WOTC Coalition, issued two urgent updates this morning from Washington DC.  The immediate extension of WOTC and other tax incentive programs faces what amounts to a precarious opportunity.

As the calendar year winds to a close, opportunities to extend the WOTC program are few in number. The good news is Senate Majority Leader Harry Reid has announced his intention that Congress will NOT adjourn until tax extenders are done.  He made this announcement in a news conference after the Senate Democrats’ most recent weekly luncheon.

“There are five things we’ve got to do, the Omnibus (bill to fund the government), payroll tax, unemployment compensation, doc fix, and tax extenders.”

 What to do Right Now:
According to Mr. Suplizio, if the tax extenders are not passed before December 31, there is a strong possibility they won’t be passed until after the elections next fall.  For this, and other reasons:

“It’s imperative we now work to persuade Senate Minority Leader Mitch McConnell to commit to enacting the tax extenders before adjournment. Please concentrate urgently on your Republican senatorial contacts. . . .”

Specifically,

  1. Inform your Republican contacts in the Senate about Majority Leader Harry Reid’s goal to pass tax extenders before adjournment
  2. Urge Senate Republicans to support the tax extenders
  3. Urge them specifically to talk with Senate Minority Leader Mitch McConnell and Republican Whip Senator Jon Kyl about the importance of including tax extenders in whatever bills emerge from their negotiations with Senate Democrats.

 

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IRS Information About HIRE Act Payroll Tax Exemption

Friday, December 31st, 2010

If your company participated in the HIRE Act’s 2010 payroll tax exemption there is important IRS information you need to know.  Without becoming anyone’s tax advisor (I’m not), let me point out a thing or two from the IRS website. I strongly recommend that you go there yourself (and make sure your payroll services provider is fully informed!). 

The first link is here:  IRS FAQs About Claiming the Payroll Tax Exemption

A more general link is this: HIRE Act – Questions and Answers for Employers

First, something that has not been obvious to everyone.  Compensation and tips subject to the payroll tax exemption must be reported on IRS Form W-2.  I mention this requirement explicitly because it might affect your timing during the busy month of January.  

For example, one large employer I work with processes their own payroll and W-2s in house.  Their VP of Accounting informed me last week that they will be custom-programming their payroll system to handle this new requirement.  Software programming, of course, requires time and it is a project that stands in the critical path of issuing timely W-2s to all their employees.

Here’s the IRS language from the IRS website

FAQ: Will employers have to indicate on the Form W-2 the qualified employees whose wages are exempt from the employers share of social security tax and/or separately report wages exempt from the employers share of social security tax?

IRS Answer A-PE24: Yes, new Code CC has been created for box 12 of Form W-2 for employers to identify qualified employees and report the amount of wages and tips covered by the payroll tax exemption. In addition, new box 12b has been created on Form W-3 to report the aggregate of Code CC.

Here’s another real dandy.  I bet you didn’t know this. 

FAQ: PE7: Is the payroll tax exemption based on when wages are earned by a qualified employee or when they are paid to a qualified employee?

IRS Answer A-PE7: The exemption is based on when wages are paid. Thus, only wages paid from March 19, 2010, through December 31, 2010, qualify for the exemption (regardless of when those wages are earned).

Go, check out the IRS website (links above).  And send your payroll provider a copy of this post. 

Happy New Year!

Posted in Hire a Hero Act of 2010 | No Responses »
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Fight Is Over For Now – Missing Tax Incentives To Stay Missing

Thursday, December 16th, 2010

The US House is schedule to vote on the tax bill today. The House Rules Committee, however, is allowing a vote on only one proposed amendment – an amendment to increase the estate tax. The rule allows no other motions or amendments on the bill.

While we hoped for an extension of the HIRE Act payroll tax exemption, that program will end for new hires (as it was originally scheduled) on December 31. Do not forget, however, that the HIRE Act’s worker-retention tax credit remains in play — many employees who qualified for the payroll tax exemption in 2010 will generate an additional income tax credit for their employer in 2011 after working for 52 weeks.

Some employers who participate in the Work Opportunity Tax Credit (WOTC) program will experience a small decrease in qualifications in 2011 as the Disconnected Youth and Unemployed Veteran target groups also expire. We are consoled, however, by the fact that the WOTC program itself has been renewed through 2011.

So, far now — for now — the fight is temporarily over. In 2011, we will be working with the new Congress to renew and extend as many of these provisions as feasible.  If you’re interested in joining the WOTC Coalition and playing some role in the effort, contact Paul Suplizio, President of the WOTC Coalition.  Visit the Coalition’s website at www.WOTCCoalition.com.

Posted in Federal Legislation | 10 Responses »
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Renewal of Key Tax Incentives Still Up In the Air

Thursday, December 9th, 2010

As reported by Jamie Dupree Washington Insider, Senate Majority Leader Harry Read’s office has released a summary of elements included in the Senate’s version of the tax compromise between President Obama and Congressional Republicans.  The list is long and may include other provision of interest to you.  For my purposes, however, this post focuses on employment-based tax incentives (and the much prized R&D credit).

The bad news (or maybe the good news, depending on your perspective and ability to read the future) is the House Democratic leadership seems to be digging in their heels against bringing a House version of the bill to the floor for a vote. 

I read through the Senate bill’s summary twice and bring you the follow excerpts:

R&D credit. The bill reinstates for two years (through 2011) the research credit.

Indian employment credit. The bill extends for two years (through 2011) the business tax credit for employers of qualified employees that work and live on or near an Indian reservation. The amount of the credit is 20 percent of the excess of wages and health insurance costs paid to qualified employees (up to $20,000 per employee) in the current year over the amount paid in 1993.

Empowerment Zones. The bill extends for two years (through 2011) the designation of certain economically depressed census tracts as Empowerment Zones. Businesses and individual residents within Empowerment Zones are eligible for special tax incentives.

District of Columbia Enterprise Zone. The bill extends for two years (through 2011) the designation of certain economically depressed census tracts within the District of Columbia as the District of Columbia Enterprise Zone. Businesses and individual residents within this enterprise zone are eligible for special tax incentives. The bill also extends for two years (through 2011) the $5,000 first-time homebuyer credit for the District of Columbia.

Work opportunity tax credit (WOTC). Under current law, businesses are allowed to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to new hires of one of nine targeted groups. These groups include members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program, qualified veterans, designated community residents, and others. The WOTC program is currently set to expire August 31, 2011. The bill extends this provision through December 31, 2011 and would be effective for employees hired after date of enactment.

Noticeably missing from the summary are extensions for a number of WOTC program target groups.  Current WOTC provisions provide for at least 12 targeted groups (A through K plus Hurrican Katrina employees), not merely the 9 mentioned in the summary. Specifically, missing from the summary are Hurricane Katrina Victims, Disconnected Youth, and Unemployed Veterans.  HOWEVER, I have not read the actual text of the bill.  These specific issues might be addressed there. 

Also, I see no mention of extending the HIRE Act’s employer payroll tax exemption into 2011.  I do, however, see a new Payroll Tax Holiday provision, which provides an automatic 2% reduction of the employee portion of the social security tax for all employees and self-employed individuals.

Keeping our fingers crossed . . ..

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Future of The HIRE Act’s Payroll Tax Exemption Benefit

Wednesday, November 24th, 2010

While many U.S. employers have taken advantage of the 2010 federal HIRE Act’s Payroll Tax Exemption benefit, many more have not.  As it currently stands, the Payroll Tax Exemption program is slated to expire on December 31, 2010; however, at least 2 facts mitigate the looming end of the program. 

First, employers who have not yet utilized the program still have an opportunity to catch up.  At my firm, we’re in the process of bringing on a new client with more than 35 business locations.  Even during this down economy, my new client has hired hundreds of employees since February 4th when the Payroll Tax Exemption program first kicked in. 

To claim the benefit, an employer must get a signed statement from the employee stating under penalty of perjury that they were unemployed during the 60 days prior to hire.  We know that many of these new employees were unemployed and would therefore be eligible.  So, as part of our boarding process, we’re surveying them — finding out which employees qualified at their time of hire. 

Now, this large employer will be exempt from the 6.2% employer-portion of the federal payroll tax for a goodly percentage of its 2010 hires.  To secure this benefit, it will have to file adjusted payroll tax returns for quarters 2 and 3. That should not be a problem.

Another benefit is that the qualifying employees who remain employed into next year (for at least 52 weeks of total employment) can trigger a bonus tax credit equal to another 6.2% of the wages paid during that first 52 weeks of employment.  We’ll continue following well into 2011 to determine the status of these employees.  Our client has an added incentive to keep them working.

For many, a technical question arises here.  Isn’t there a deadline for getting the employee’s signed affidavit?  Answer: Yes, and no.  Here’s the IRS’ way of explaining it. 

[T]he employer must have the signed affidavit by the time the employer files an employment tax return applying the payroll tax exemption. If the employer obtains the signed affidavit from the qualified employee after wages are paid to the employee, the employer can still apply the payroll tax exemption to determine its liability on these wages. In some cases this may require the filing of a corrected return for a prior quarter.  IRS FAQs

In other words, you must get the statement before you actually claim the benefit.  But, you can get the statement then go back and claim the benefit using an adjusted tax return.  In the case of my new client, their payroll service will need to file adjusted returns, IRS Form 941X in order to claim the benefit for quarters 1, 2 and 3.

So, where does this all go as of December 31, 2010?  Will the Payroll Tax Exemption program be extended for another year?  According to Paul E. Suplizio, President of the WOTC Coalition, there is no certainty but the odds favor an extension as Congress and the Administration continue to grapple with the problem of unemployment in 2011. 

If you have questions about the HIRE Act’s Payroll Tax Exemption program, or any other employment based tax benefit, please feel welcome to contact me.  I am Vaughn Hromiko, (800) 655-5281, ext 101 or vah@WOTCPlanet.com

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Americans Want to Work Act – Proposal Would Extend Payroll Tax Holiday

Monday, August 16th, 2010

U.S. Senator Debbie Stabenow of Michigan has introduced S3706, The Americans Want to Work Act.  Of most interest to this forum is that this bill would extend the HIRE Act’s Payroll Tax Exemption through the end of 2011.  The Payroll Tax Exemption is currently slated to expire on December 31, 2010.

From the Senator’s website:

HIRE Act Background: The HIRE Act, signed into law earlier this year, provides two new tax incentives for employers to hire unemployed workers. Under the HIRE Act, businesses that hire Americans who have been out of work for at least 60 days are exempt from paying their 6.2 percent share of Social Security payroll taxes for all new hires up to the FICA wage cap of $106,800. To promote long-term employment, the HIRE Act also provides an additional $1,000 general business tax credit for each worker retained for at least one year.

Americans Want to Work Act Provisions: The bill includes two key provisions that apply to all states:

*       Extends the successful HIRE Act Payroll Tax Exemption for one year, through the end of 2011.

*       Doubles the general business tax credit, from $1,000 to $2,000, for businesses that hire (and retain for 52 weeks) someone who has exhausted all unemployment benefits. This is applicable to anyone who has exhausted all unemployment benefits or that is eligible for Tier 5. This would be effective at the date of enactment.

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U.S. Treasury Department Reports RE HIRE Act Payroll Tax Exemption

Friday, August 6th, 2010

On August 2, the U.S. Treasury Department published a report titled Updated Estimates of Newly Hired Employees Eligible for the Hire Act Tax Exemption.  If you have a problem with that link, you can still read the Department’s press summary.

This new report provides monthly updated estimates of potential eligibility under the HIRE Act, including data through June 2010. According to the updated estimates, from February 2010 to June 2010, businesses hired 5.6 million new workers who had been unemployed for eight weeks or longer;

While it is interesting that businesses hired 5.6 million potentially eligible workers, the Treasure Department can not tell us anything yet about how many employees have actually been claimed as eligible.  That number is much much smaller — but how small we won’t know until next year after the 2010 tax returns has been analyzed.

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Amazing Map — Geography of a Recession — And the Hire Act Payroll Tax Exemption

Wednesday, July 28th, 2010

This amazing map was published by the American Observer (American University’s Graduate Journalism Magazine). Using color mapping, it illustrates the monthly progress of the recession in each U.S. county as reflected by increasing levels of unemployment.

With the unfortunate and deep increases in unemployment throughout the country, companies really need to be looking at their eligibility for the HIRE Act’s 2010 Payroll Tax Exemption.  If an individual has been unemployed for 60 days or more prior to their hire date, their new employer is exempt from paying the 6.2% employer portion of the federal payroll tax.  The benefit applies to wages earned from March 19 through December 31, 2010.

The YouTube version of the map is posted below but I recommend you visit the American Observer’s website and view the original presentation.

To see the original presentation, click HERE  (Don’t forget to press play.)

Posted in Unemployed Workers | No Responses »
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US Teasury Department Says Employers Missing Out on 2010 Payroll Tax Exemption – Obama Will Likely Push for Extension

Monday, July 12th, 2010

I found this piece by Deborah Solomon, published online today by the Wall Street Journal.

While accurate statistics will not be available until year’s end when companies complete the filing of their tax returns, anecdotal evidence suggest the HIRE Act’ 2010 Payroll Tax Exemption is far from being fully utilized by U.S. employers. In response, President Obama’s Treasure Department is expected to begin marketing the program more aggressively. The Obama Administration will also probably seek to extend the program beyond its current December 31, 2010 expiration date.

Note that Ms. Solomon characterizes the payroll tax exemption as a tax credit, which is not exactly accurate, but we can live with that!

Earlier this year, Congress approved a tax credit that rewards employers who hire those out of work 60 days or longer. Of the 15 million Americans now unemployed, about 6.8 million have been out of work longer than six months—more than at any time since the Labor Department began keeping track in 1948.

The Hiring Incentives to Restore Employment, or HIRE, exempts wages paid to qualifying workers from the employer’s 6.2% share of Social Security payroll taxes for the remainder of this year, and gives an additional $1,000 tax credit to employers for every worker they retain for 52 weeks.

The Treasury estimates that so far 4.5 million workers are eligible for the payroll tax exemption—a potential tax savings to employers of $8.5 billion—but Treasury officials worry businesses are unaware of the credit and might not take advantage before it expires in December. The administration will likely push for an extension.

According to the article, there are about 15 million Americans currently out of work. Of those, 6.8 million have been unemployed not only for 60 days but for longer than 6 month!

Please contact me, Vaughn Hromiko, with your questions about the HIRE Act’s Payroll Tax Exemption program.  Reach me by e-mail at vah@wotcplanet.com or toll free at 800-655-5281, ext 101.

DEBORAH SOLOMON

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Procedures for Correcting Form 941 – IRS Fed State & Local Governments Update

Monday, July 12th, 2010

The July 2010 issue of the IRS Federal State & Local Government Newsletter discusses procedures for making correction to IRS Form 941, which is the Employer’s Quarterly Federal Tax Return.

While the newsletter update does not directly address the HIRE Act’s Payroll Tax Exemption, it may be relevant to employers who need to adjust their IRS 941 as a result of identifying employees who qualify under that program.

http://www.irs.gov/pub/irs-tege/p4090_0710.pdf

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