HIRE Act & Healthcare Reform Bill
By: Frederick H. Hutchins, CPA/PFS, MTX, CFP
HIRE Act
The Hiring Incentive to Restore Employment Act (HIRE Act) (March 18, 2010) provides an employer payroll tax exemption for qualified newly hired employees. The provisions of the HIRE Act are less restrictive than employment stimulative laws of prior years and, accordingly, may benefit many businesses in our area. This is especially true because of the seasonal hiring pattern of our economy. A brief summary:
Benefits:
· The 6.2% employer share of social security taxes (OASDI) is exempted on newly hired qualified unemployed workers. This exemption applies to qualified workers hired after February 3, 2010 and applies to wages paid from March 19, 2010 until December 31, 2010.
· A Retention Credit of up to $1,000 is possible for a “retained worker” who is a qualified employee that is continuously employed for a period of not less than 52 consecutive weeks and receives wages for such employment during the last 26 weeks of such period that are at least 80% of such wages during the first 26 week period. This potential credit is for years ending after March 18, 2010.
Requirements:
· Qualified worker – begins employment after February 3, 2010 and before January 1, 2011
· Not related to the employer
· Signs an affidavit (Form W-11),under penalties of perjury, that he or she has not been employed for more than 40 hours during the 60 day period prior to the employment starting date
How to Claim the Payroll Tax Exemption:
· Claimed on Form 941 (Employer’s Quarterly Federal Payroll Tax Return) beginning with second quarter of 2010.
Payroll Tax Incentive Eligibility Worksheet
Hutchins Allen & Company, P.A.
Prepared by: David Warner, Wealth Management Advisor and Tara White, Associate Accountant
Please contact us about the possible applicability of this law to your business circumstances.
Healthcare Reform Bill
Some elements of the bill are slated to take effect within the next year, while others will take some time to implement.
Key Provisions Effective Immediately:
· Tax credits for businesses with fewer than 25 employees and average annual wages of less than $40,000 that provide health insurance (provided on a sliding scale based on wages and number of employees).
Key Provisions Effective In Six Months:
· Insurance coverage for dependent children must be provided up to the age of 26 under group and individual policies.
· Bans health plans from dropping people from coverage when they get sick, and prohibits health plans from denying coverage to children under the age of 19 with preexisting conditions. (In 2014, that prohibitionwould extend to everyone.)
· Prohibits lifetime limits on coverage.
· Tightly restricts new plans’ use of annual limits.
Key Provisions Effective In 2011 and Beyond:
· Employers will be required to report the aggregate value of the benefits they provide for all health coverage, excluding Medical FSAs, on employees’ W-2s.
· Itemized deduction threshold for unreimbursed medical expenses will increase to 10% of AGI.
· Uninsured individuals will face fines for not maintaining health insurance and employers with 50 or more employees will be required to offer health coverage to full time employees or be subject to penalty.
· Medical FSA contributions will be capped at the lesser of the company’s plan maximum or $2,500, effective January 1, 2013.
· Medicare tax will increase to 2.35% on earnings over $200,000 ($250,000 for families) and a 3.8% Medicare tax will be imposed on unearned income.
Many additional provisions will be implemented as far out as 2018.
Year of the ROTH Conversion
By: David Warner, Wealth Management and Investment Advisor
Beginning in 2010, the rules surrounding conversions of IRA money to ROTH IRA money are changing. In years past, a MAGI (Modified Adjusted Gross Income) of less than $100,000.00 was required to convert; not so any longer. This change, along with the removal of the restrictions against Married Filing Separately filers from converting, makes conversions available to just about everyone. And 2010 is an opportune time to consider this option.
The decision to convert should be made with care and several factors should be considered. Three key factors for consideration include:
1. Taxes
If you are in a lower tax bracket today than you expect to be in at retirement, you might consider a conversion. You would pay lower taxes on the conversion than you may pay upon distribution at retirement.
2. Time
The relative conversion benefits increase over time. If it is your intent to distribute money from your ROTH shortly after conversion, than a conversion may not make sense.
3. Cost
If you cannot pay the taxes you will owe with a conversion with cash on hand or other non-retirement savings, the cost of conversion may outweigh potential benefits.
Eligibility to convert in 2010 does not automatically make it a good idea. If a ROTH conversion did not make sense for income tax purposes before 2010, it probably will not at this juncture. Consult with your tax and investment advisor to learn more.
Contribution Limits:
401k, Simple IRA, Traditional IRA, Roth IRA
401k Plan:
Below is an outline of the contribution limits for 2009 - 2010.
2009:
$15,500/year
$20,500/year if you are 50+ years old (includes catch-up contribution)
2010:
$16,500/year
$22,000/year if you are 50+ years old (includes catch-up contribution)
Simple IRA:
Below is an outline of contribution limits for 2008 and 2009.
2009:
$10,500/year
$13,000/year if you are 50+ years old (includes catch-up contribution)
2010:
$11,500/year
$14,000/year if you are 50+ years old (includes catch-up contribution)
Traditional IRA & Roth IRA:
Below is an outline of contribution limits from 2008-2009.
2009:
$5,000/year
$6,000/year if you are 50+ years old (includes catch-up contribution)
2010:
$5,000/year
$6,000/year if you are 50+ years old (includes catch-up contribution)
Hutchins Elected to HREPC
Allen & Company, P.A. is pleased to announce the election of Frederick H. Hutchins, CPA/PFS, MTX, CFS, to the Hampton Roads Estate Planning Council (HREPC). The mission of HREPC is to improve the quality of estate planning services to the general public by providing educational programming for professionals engaged in the drafting, administration and execution of estate plans. “I am pleased to be a part of this council and look forward to participating in its educational mission, says Frederick Hutchins. We strongly believe in the importance of participating in civic and professional organizations to both benefit our communities and our clients."
On Thursday, June 3 at the Hilton Garden Inn in Kitty Hawk, the firms of Hutchins Allen & Company, P.A. and Casey & Ragaller, PLLC presented a seminar for the Outer Banks Association of Realtors on “Legal Issues and Tax Implications” that included such topics as short sales, deficiency judgments, and decision making when faced with foreclosure and bankruptcy.
Seminar presenters from left to right: Michael Casey (Casey and Ragaller, PLCC); Frederick Hutchins,
Kurt Canning and Erin Hughes (Hutchins Allen & Company, P.A.); and Jeff Scott (Scott Team Realty).
BPW Board Elections
Tara White and Ann-Marie South, both of Hutchins Allen & Company, were recently elected to serve on the Board of the Virginia Dare Business and Professional Women’s Association (BPW). Ann-Marie South, Accounting Technician, was elected Co-President of the BPW, along with Paisley Wessel, for the 2010-2011 term. Tara White, Associate Accountant, was elected Treasurer. The Business and Professional Women’s Association is a local organization that works to foster business and professional opportunities for women in Dare County.
