Americans have been waiting with bated breath for the fate of the health care reform bill. I am not going to postulate on my opinions of the bill because this publication is nonpartisan, but two bills that were passed by congress in the last month have a significant impact on a business’s bottom line and the word needs to get out so you can start saving money.
The first bill is the more important from the standpoint of savings, but it also has a time limit, and the clock, as they say, is ticking.
I am referring to the Hire Act, also known as the Jobs Stimulus Program. Under this act, a private or nonprofit employer who hires any person who has been unemployed for the last 60 days is able to claim a significant tax benefit — immediately. To be perfectly clear, the act provides that the new hire may have worked 40 hours over those 60 days.
The benefit is that the company does not have to pay the employer share of the Social Security tax for taxes due after March 19, 2010. This remains in effect for the balance of 2010 (6.2 percent). Hence, the timeliness issue. The clock is already ticking and the sooner you hire someone, the more benefit is available.
This has an immediate impact. You will not have to pay that money to the IRS as a deposit on your 941 taxes when due. It is treated on the revised 941 form as a deduction from taxes paid.
The second part of the law provides that, if the person hired is still working for you one year later, you will be entitled to a $1,000 credit. Since this part is not applicable until some time in 2011, the rule writers at the IRS have not promulgated the rules as of this writing.
The law took effect for employees who were hired on or after February 3, 2010, even though it was signed into law in mid-March. The law does not apply to relatives of the company owner. The definition of a relative is covered in the form I will describe below.
The IRS came out with the first form needed in this process during early April. Any eligible employee will have to complete form W-11. This form certifies that the employee had been unemployed for 60 days prior to the hire date. It is an affidavit and should be kept in the company files and not sent to the IRS.
If you hired people after February 3 and before today, you may backfill your files with the form W-11. Note that the credit starts on March 19, 2010 — the day the bill was signed into law. So the employee is anyone hired after February 3, but the credit applies to wages paid on or after March 19. Our understanding is that it also applies to part-time workers who otherwise qualify, and it does not apply to household employees.
The second bill is The Health Care Reform Act, which contains a provision that will be of immediate benefit to certain companies and nonprofits. In order to qualify, you must have fewer than 25 employees (full-time equivalents), have an average wage of less than $50,000 per employee, and pay at least 50 percent of the employee’s health care premium. Owners’ wages are not counted in the calculation.
The credit in this case is 35 percent of the premium paid and will increase over time until it reaches 50 percent in 2014.
This credit is more complicated than the Hire Act and I will not spend time going through the rules, which are filled with bureaucratese. I would refer you to your accountant or insurance adviser to see if you qualify. Also, bear in mind that by changing a rule or two within your company’s structure, you may be able to change a non-qualifying plan into a qualifying one.
For a copy of form W-11, go to the IRS web site www.irs.gov/pub/irs-pdf/fw11.pdf. •
Dave Mount is the owner of Westaff in Burlington.