Take your asprin...this is no time to have a hangover when it comes to tax compliance and planning. Congress has been very busy with law changes and new laws will impact your tax planning for 2010 and beyond.
Patient Protection and Affordable Care Act / Health Care and Education Reconciliation Act of 2010
Seems like old news already. This hotly debated law is now on the books. There are a number of tax law changes in the new law. Small business tax credits go into effect in 2010. Qualified small employers (no more than 25 employees and average annual wages of no more than $50,000) can qualify for a tax credit equal to 35% of their contribution toward the employee's health insurance premium.
In following years, individuals and businesses may be faced with:
- Monetary penalties for individuals who fail to maintain minimum essential health coverage.
- Coverage tax credits for individuals who cannot afford minimum essential health coverage.
- Non-deductible penalties assessed on large employers (generally more than 50 employees) who fail to offer full time employees with the opportunity to enroll in minimum essential coverage.
- An increased Medicare tax base for high-income taxpayers that imposes an additional Hospital Insurance tax rate of .9% on earned income in excess of $250,000 (married filing jointly) and a 3.8% unearned income Medicare contributions tax on high income taxpayers.
In an effort to incentivize employers to hire, Congress passed new law that includes incentives for hiring and retaining workers. Included in this bill is an extension of the enhanced section 179 expensing...$250,000 expensing limit phased out based on total purchases in excess of $800,000.
The main thrust of the new law is payroll tax forgiveness. Wages paid to previously unemployed new hires for any 2010 period starting after March 18, 2010 through December 31, 2010 are not subject to the 6.2% OASDI Social Security tax. Qualified employees must start work after February 3, 2010 and before January 1, 2011. A qualified employee must have been unemployed for at least 60 days before his or her start date.
Employers that hire new workers who qualify for payroll tax forgiveness and keep them on the payroll for at least 52 consecutive weeks may be eligible for an additional tax credit. The employer can claim a credit equal to the lesser of $1,000 or 6.2% of the wages paid to the employee for the 52 week period.
More to come...
Most believe the Bush tax cuts will be allowed to expire at the end of 2010. This likely means long term capital gains and qualifying dividends will be subject to a 20% tax rate vs. the current 15%. This change in the law happens automatically on January 1, 2011 based on law already on the books.
No much talk lately about it, but Congress still seems intent on reinstating the Estate tax. The Estate tax expired on January 1, 2010. It will likely be back with a retroactive effective date of January 1, 2010.
Come back. There will be more...
