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Following is a summary
of significant tax developments that may affect your family members
and businesses. Please contact our office if we can be of assistance
to you with regard to these or any other matters.
Deadline extended for closing home purchase to qualify for homebuyer
credit.
Relief has been provided to taxpayers who could not meet a key June
30, 2010, closing date for qualifying for the homebuyer credit.
In general, both the regular first-time homebuyer credit of $8,000
and the reduced credit of $6,500 for long-term residents expired
for homes purchased after April 30, 2010. However, if a written
binding contract to purchase a principal residence was entered into
before May 1, 2010, the credit could be claimed if the purchase
closed before July 1, 2010. Under the relief measure, if a written
binding contract to purchase a principal residence was entered into
before May 1, 2010, the credit may be claimed if the purchase is
closed before October 1, 2010. Thus, this extension allows homebuyers
who signed a contract no later than the April 30th deadline to complete
their closing by the end of September.
Guidance addresses tax breaks for hiring new employees.
Employers are exempted from paying the employer 6.2% share of Social
Security (i.e., OASDI) employment taxes on wages paid in 2010 to
newly hired qualified individuals. These are workers who: (1) begin
employment with the employer after February 3, 2010 and before January
1, 2011, (2) certify by signed affidavit, under penalties of perjury,
that they have not been employed for more than 40 hours during the
60-day period ending on the date the individual begins employment
with the qualified employer; (3) do not replace other employees
of the employer (unless those employees left voluntarily or for
cause), and (4) are not related to the employer under special definitions.
The payroll tax relief applies only for wages paid from March 19,
2010 through December. 31, 2010.
Employers may qualify for an up-to-$1,000 tax credit for retaining
qualified individuals. The workers must be employed by the employer
for a period of not less than 52 consecutive weeks, and their wages
for such employment during the last 26 weeks of the period must
equal at least 80% of the wages for the first 26 weeks of the period.
The IRS has issued guidance on these tax breaks in the form of frequently
asked questions. They carry valuable information on subjects such
as the scope of the exemption, how it interacts with other tax breaks,
and when an employer must receive the employee's certification of
former unemployment status. For example, the IRS explains that the
exemption and credit can be claimed for a new employee replacing
a downsized employee.
Detailed guidance released on new small business health
care credit.
The IRS has issued detailed guidance on the small employer health
insurance credit created by the recently-enacted health reform legislation.
Under the new law, effective for tax years beginning after December
31, 2009, an eligible small employer (ESE) may claim a tax credit
for non-elective contributions to purchase health insurance for
its employees. An ESE is an employer with no more than 25 full-time
equivalent employees (FTEs) employed during its tax year, and whose
employees have annual full-time equivalent wages that average no
more than $50,000. However, the full credit is available only to
an employer with 10 or fewer FTEs and whose employees have average
annual full-time equivalent wages from the employer of not more
than $25,000. The new guidance adopts a liberal approach to the
new law's requirements, including three alternative methods for
figuring total hours of service (important for determining how may
FTEs an employer has), and also explains how small employers claim
the credit if their State provides a credit or subsidy for employee
health coverage. The IRS has released a state-by-state table of
average health insurance premiums for the small group market for
the 2010 tax year. The table is needed to calculate the credit for
this year.
Guidance issued on new under-age-27 rule for health coverage
of children.
The IRS has issued guidance on the tax treatment of health coverage
for children under age 27 under the new health reform law. The new
under-age-27 rule, which went into effect March 30, 2010, applies
broadly to employer-provided coverage or reimbursements, cafeteria
plans, flexible spending arrangements (FSAs), health reimbursement
arrangements (HRAs), voluntary employees' beneficiary associations
(VEBAs), and the above-the-line deduction for a self-employed individual's
medical care insurance costs.
To comply with the requirements of IRS Circular 230, we must inform
you that the information discussed above is not intended or written
to be used, and cannot be used by the recipient or any other taxpayer,
for the purpose of avoiding penalties that may be imposed under
the Internal Revenue Code or any other applicable tax law, or to
promote, market or recommend to another party any transaction, entity,
investment plan, arrangement or other matter.
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