THE DAVID R. BERGMANN GROUP
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BUSINESS TAX CHANGES in the 2020 HIRE ACT
I'm writing to give you an overview of the key tax changes affecting business in the recently enacted Hiring Incentives to Restore Employment (HIRE) Act. Please call our offices for details of how the new changes may affect your specific business.
Extension of enhanced small business expensing (Section 179). The new law gives a one-year lease on life to enhanced expensing rules, which allow qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. For tax years beginning in 2010, the maximum amount that a business may expense is $250,000, and the expensing election begins to phase out when a business buys more than $800,000 of expensing-eligible assets. These dollar limits are the same as those that were in effect for 2008 and 2009.
Payroll tax holiday and up-to-$1,000 credit for employers who hire unemployed workers. To help stimulate the hiring of workers by the private sector, the new law exempts any private-sector employer that hires a worker who had been unemployed for at least 60 days from having to pay the employer's 6.2% share of the Social Security payroll tax on that employee for the remainder of 2010. A company could save a maximum of $6,621 if it hired an unemployed worker and paid that worker at least $106,800—the maximum amount of wages subject to Social Security taxes—by the end of the year.
As an additional incentive, for any qualifying worker hired under this initiative that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for an additional non-refundable tax credit of up to $1,000 after the 52-week threshold is reached, to be taken on their 2011 tax return. In order to be eligible, the employee's pay in the second 26-week period must be at least 80% of the pay in the first 26-week period.
Workers hired after the date of introduction of the legislation (Feb. 3, 2010) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after the date of the new law's enactment receive the exemption for payroll taxes.
Here are some additional features of the new hiring incentive:
collected in the first place.
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generally not eligible for either benefit. However, employment by a public higher education institution would qualify.
maximum on the dollar amount of payroll taxes per employer that may be forgiven.
other for 2010—no double dipping.
prior employee left the job voluntarily or for cause.
for more than 40 hours during the 60-day period ending on the date the employment begins.
$40,000 worker and a $90,000 worker.
the Social Security payroll tax would have been reduced under the payroll tax holiday provision during the fist calendar quarter is
applied against the tax imposed on the employer for the second calendar quarter of 2010.
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Here are some more additional features of the new hiring incentive:
worker during the 52-consecutive-week period. Thus, the credit for a retained worker will be $1,000 if, disregarding rounding, the
retained worker's wages during the 52-consecutive-week period exceed $16,129.03. However, the credit is not available for pay
not treated as wages under the Code (e.g., remuneration paid to domestic workers).
credit bonds for school construction, energy conservation and renewable energy. The federal government subsidizes these tax
credit bonds by providing investors in these bonds with a federal tax credit in place of interest that would otherwise be payable on
the bond. In lieu of providing investors with federal tax credits, the new law allows issuers of qualified school construction bonds,
qualified zone academy bonds, clean renewable energy bonds, and qualified energy conservation bonds to elect to receive a
direct payment from the federal government equal to the amount of the federal tax credit that would otherwise be provided for
these bonds.
measures to reduce offshore noncompliance by giving IRS new administrative tools to detect, deter and discourage offshore tax
abuses; and (2) a three-year delay (through 2020) of implementation of worldwide allocation of interest—a liberalized rule for
allocating interest expense between U.S. sources and foreign sources for purposes of determining a taxpayer's foreign tax credit
limitation..
I hope this information is helpful. If you would like more details about these provisions or any other aspect of the new
law, please do not hesitate to call.
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Our work with closely held business owners can involve a wide array of services both personal and business.
Our ability to provide this broad spectrum of services to both the business owner and her or his family enables our business owner clients to have more time to focus on the two most important components of their lives - their work in creating value in the business and their quality time with families and loved ones or their avocations which bring greatest joy, life fulfillment and lasting legacy.
To optimize the business asset as a tool for providing for the business owner and his or her family during their working lifetime and then in retirement, or for an event such as a sudden disability or unexpected death, we would look to address issues such as some of the those posited on the next tab below called - 'Got A Q to be Answered'.
The value of having a closely held business is that there are so many opportunities to integrate and strategically structure tax savings strategies that capture the greatest after tax return of a dollar earned in, and from, the business. The landscape for tax and benefit planning is forever changing so it is incumbent on us closely held business owners to be diligent in overseeing the optimal use of that earned dollar of business income when we are considering our business and familys needs!
Our fees for general consulting are $300.00 per hour. For a specific business analysis we may be able to offer a flat fee engagement of services.
We offer a variety recordkeeping and other business owner services both in-house and through outside independent contractors whose businesses are independent from the David R. Bergman Group and are not affiliated service providers.
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Are business valuations optimized and estate taxes minimized in our estate planning structure?
Is the business structure optimizing tax benefits and income shifting opportunities?
Are employee benefit plans, such as group health, life, and disability, delivering benefits that are needed and utilized or are benefit dollars being over expended?
Are retirement plans in place and if so, could there be a plan design that would better benefit those that the business owner desires to provide for?
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Are there any special tax rules in any current legislation that will impact how my business is taxed or that will provide a special current year tax benefit?
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