20.03.2010 Business, Credit, Payroll, Resources, Starting a Business, Taxes, Uncategorized Comments Off

Hiring Incentives to Restore Employment (HIRE) Act Enacted Into Law

Obama signed the Hiring Incentives to Restore Employment (HIRE) Act on Thursday! This Act provides employers with the opportunity to receive two new tax benefits when they hire workers who were previously unemployed or only worked part-time. Although household employers are not qualified to receive the benefits, businesses, agricultural employers, tax-exempt organizations and public colleges and universities are. So, before you start hiring, here are some things to think about…

When an employer hires qualified workers after February 3, 2010 and before January 1, 2011 they can receive a 6.2% Social Security tax incentive (a savings of up to $6,622) for each worker. There are no limits or phase-outs for the benefits claimed, they can hire as many qualified workers as they wish, and it has no effect on the employee’s future Social Security benefits!

The savings are applied to wages paid after March 18, 2010. If an employer realizes these benefits in March, they will have a credit applied to their second quarter employment taxes. The IRS says that they will make revised 941 Forms and details available in the next few weeks.

The Social Security benefit sounds pretty good, right? Well, the HIRE Act doesn’t stop there. When an employer retains the qualified workers for at least one year (52 consecutive weeks), they can claim an additional tax credit of up to $1,000 per worker! The credit can be claimed on the business’s 2011 income tax return. The only catch is that the total wages paid to each worker starting 6 months after the hire date to 1 year after the hire date must equal at least 80% of the total wages paid to that same worker during the first 6 months (26 weeks) of employment.

Still interested in going for the tax benefits? Here are the criteria that an employee must meet:

• A statement certifying that he or she was unemployed or worked fewer than 40 hours during the 60 day period prior being hired must be provided by the employee. The IRS is currently developing a form for this. 
• He or she must be a new hire for the employer.
• He or she can fill an existing position, so long as the previous worker left the position voluntarily or for cause.
• Family members and other relatives do not qualify.

Even though an employer may be eligible to take this Social Security tax break, they still need to withhold the employee’s share of Social Security taxes, Medicare taxes, and Income taxes, as well as provide the employer’s share of Medicare taxes and Unemployment taxes. If you are an employer hiring a qualified employee, be sure to tell your payroll tax specialist to ensure that you receive the benefits without any issues.

DISCLAIMER: All information on this post is the opinion of the author and is not offered as legal advice. Please consult the appropriate authoritative laws, codes, rulings, cases, etc. for the most accurate and timely information. This firm offers valuable professional tax advice only as part of prepaid engagements.

15.09.2009 Credit, Resources, Uncategorized Comments Off

What's in the Credit Card Accountability, Responsibility, and Disclosure Act for you?

President Obama signed into law many of the federal regulators’ rules approved in 2008 giving more clout to consumer protection in regards to credit card practices.  In general, the new law goes into effect February 22, 2010, although some provisions became effective August 21, 2009.  Here is a highlight summary of the law.

Interest Rates:

• Card issuers cannot increase your interest rate in the first year.
• Interest rates on existing balances cannot be increased without your being able to “opt out” by canceling the card.
• Issuers cannot use your history with another creditor to raise your rates.
• Promotional rates must last at least 6 months.
• Issuers must provide 45 days’ notice of interest rate, fee, and finance charge increases. 
• Two-cycle billing, where an issuer calculates interest based on paid-on-time balances from a previous cycle, is prohibited.

Fees:

• Pay to pay is no more.  Issuers cannot charge you a fee for paying your credit card debt over the phone or online unless you speak with a live operator. 
• Issuers cannot charge you an “over-the-limit” fee unless you elected to allow the issuer to complete over-the-limit transactions.  They will also be limited to charging 3 over-the-limit charges for a single infraction. 
• Penalty fees must be reasonable and proportional to the omission or violation.

Payments:

• Statements must be mailed 21 days before the bill is due, instead of the current 14 days.
• Payments in excess of the minimum must be applied first to the credit card balance with the highest interest rate.

Safeguards:

• Applicants under the age of 21 must show proof that they have independent means of repaying any credit or must obtain the signature of someone age 21 or older who will take responsibility for the debt.
• Card companies must consider a consumer’s ability to pay when issuing credit cards or increasing credit limits.
• Gift cards must have at least a 5 year life span.
• Statements must show how long it will take to pay off a balance and what it will cost in interest if the cardholder only makes the minimum monthly payments.

Many of these changes do not take effect until February 22, 2010, allowing the credit card companies time to makeup perceived lost profits. Fees and interest rates increased while available credit decreased for many credit card users during the summer months. It was reported that the same banks that received TARP funds, reported record profits for the month of August, 2009. The financial news reported the profits where due to increased credit card fees and speculated more people were caught being unable to meet their credit card obligations due to so many job losses. I think the new laws will help many consumers. I also think that its important to know what is in your wallet.