- Days left

New tax incentives for employers: Are they enough?

Recent data from the Department of Labor indicates that unemployment remains a problem. As of February, the national unemployment rate was 9.7%. This rate is down from the 2009 high of 10.1% in October but not dropping as quickly as hoped.

As part of efforts to boost the numbers of Americans with jobs, two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act signed into law by President Obama this month.





Employers who hire previously unemployed workers after Feb. 3, 2010, but before the end of the year may qualify for a 6.2% payroll tax break. The tax break has the effect of exempting employers from their share of Social Security taxes on wages paid to these workers after March 18, 2010 (the date the bill became final). This is good news for employers struggling to meet payroll this year, and Congress hopes the incentive will spur hiring for the spring and summer seasons.

The benefit applies to businesses, agricultural employers, tax-exempt organizations, and public colleges and universities who hire eligible employees. The IRS will require that employers get a statement of eligibility from all new hires. Household employers cannot claim this new tax benefit for household employees such as nannies and maids. Additionally, employers may not claim the tax break for hiring relatives even if they otherwise meet the criteria.

If employers keep those new employees on their payrolls, they may claim an additional tax credit of up to $1,000 per worker when they file their 2011 income tax returns. Credits are appealing to employers because they are dollar for dollar reductions in taxes due.

Employees would still be subject to Social Security withholding from their wages. However, the reduced payroll tax on the employer's side will not have any effect on the employee's future Social Security benefits. Medicare taxes would also still apply for wages on the employer and employee side.

The IRS believes these incentives will help boost the economy. IRS Commissioner Doug Shulman said, in reference to the Act, "These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead."

What do you think? Is it enough to get the economy going again?

Increase your money and finance knowledge from home

How much house can I afford

Home buying 101, evaluating one of your most important financial decisions.

View Course »

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

TurboTax Articles

Video: Who Qualifies for an Affordable Care Act Exemption (Obamacare)?

The Affordable Care Act requires all Americans to have health insurance or pay a tax penalty. But, who qualifies for an Affordable Care Act exemption? Find out more about who qualifies for an exemption from the Affordable Care Act tax penalty, how to claim an exemption on your tax return and how the Affordable Care Act may affect your taxes with this video from TurboTax.

Video: How to Claim the Affordable Care Act Premium Tax Credit (Obamacare)

The Affordable Care Act Premium Tax Credit is a new refundable tax credit that can lower your monthly health insurance premiums. If you qualify for the tax credit, you can claim the Premium Tax Credit throughout the year to lower your monthly health insurance premiums, or claim the credit with your tax return to either lower your overall tax bill or increase your tax refund.

Deducting Summer Camps and Daycare with the Child and Dependent Care Credit

If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.

What Is Schedule H: Household Employment Taxes

If you hire people to do work around your house on a regular basis, they might be considered household employees. Being an employer comes with some responsibilities for paying and reporting employment taxes, which includes filing a Schedule H with your federal tax return. But even if you have household employees, filing Schedule H is required only if the total wages you pay them is more than certain threshold amounts specified by federal tax law.

Add a Comment

*0 / 3000 Character Maximum