July 17, 2010
Dear Client:
There have been quite a number of important tax developments in the second quarter of 2010. The following represents a summary of the most important which may affect you and your business.
Homebuyer Credit
The deadline has been extended for closing home purchases to qualify for the homebuyer credit. Those taxpayers who could not meet the key June 30, 2010 closing date for the homebuyer credit; it has now been extended until September 30, 2010. This extension allows homebuyers who signed a contract no later than the April 30th deadline to complete their closing by the end of September.
Tax Breaks for Hiring New Employees
Employers are exempted from paying the employer 6.2% share of Social Security employment taxes on wages paid in 2010 to newly hired qualified individuals. These are workers who begin employment with the employer after February 3, 2010 and before January 1, 20111 and 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. Further they do not replace other employees off the employer, unless the employee left voluntarily or for cause and 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 particulars of this credit are on an employer by employer basis and should be considered carefully.
New Small Business Health Care Credit
Effective for tax years beginning after December 31, 2009, an eligible small employer may claim a tax credit for nonelective contributions to purchase health insurance for its employees. The guidance adopts a liberal hours of service and also explains how small employers claim the credit if their State provides a credit or subside for employee health coverage. Again, this credit is on an employer by employer basis and should be considered carefully.
New under age 27 Rule for Health Coverage of Children
Under the new health reform law, which went into effect March 30, 2010, employer-provided coverage or reimbursements, cafeteria plans, flexible spending arrangements, health reimbursement arrangements, voluntary employees’ beneficiary associations, and the above the line deduction for a self-employed individual’s medical care insurance costs can now include children of the employee under age 27.
Additional changes in 2010 concern the following items:
· Deadline extended for retirement plans in federally declared disaster areas in eight states. The states include Alabama, Connecticut, Massachusetts, Mississippi, New Jersey, Rhode Island, Tennessee and West Virginia.
· Therapeutic Discover Project Program Implemented. Created by the recently enacted health reform legislation, the program will provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support good jobs and increase U. S. competitiveness. There is a deadline date of July 21, 2010 for firms applying for certification for tax credits or grants under the program.
· Temporary regulations fill in statutory gaps on new indoor tanning tax. The Internal Revenue Service has issued temporary regulations addressing the new 10% excise tax on indoor tanning services provided on or after July 1, 2010. They address prepayments for tanning services and services provided as part of a gym membership.
Congress is currently considering many of the tax law benefits that expired at the end of 2009 as well as changes to the inheritance tax.
The Internal Revenue Service will begin a new registration of tax return preparers on September 1, 2010, encouraging taxpayers to use a tax professional who signs their return and one that has their confidence that their returns will be correctly filed.
I know these changes are important to you and I reaffirm my commitment that as your tax professional I will keep you informed as to the changes in the tax law that affect you and your business and that all of my efforts will be to ensure that you meet your tax obligations and pay the lowest legal amount of tax.
I am honored to be your tax professional!
Sincerely,