Free Money! Free Money! Free Money!

Did you know that the federal government and the State of Utah are giving away money?   Have you been thinking about going green?   If so, now may be a great time to do so.

Federal Government Program:

If you are a homeowner there is a 30% nonrefundable credit available for purchases through December 31, 2010 for heating, ventilating and air conditioning systems, insulation, roofs, water heaters, windows and doors.  The credit is available for purchases related to your primary residence only. It is not available for second homes or vacation homes.

The combined maximum amount of federal credit for 2009 and 2010 is $1,500.   For example if you make eligible purchases of $3000 in 2009 and $4000 in 2010 you would be eligible for a credit of $900 ($3000 x 30%) in 2009 and $600 in 2010 ($4000 x 30%-$900).

Qualifying products must meet specific requirements; however, taxpayers may rely on Manufacturers Certification Statements.   These are available from the manufacturer's website or may be provided by the installer.

Only product qualifies for the credit.   Labor costs for installation should not be included in the calculation of the credit.

Utah Energy Program:

The Utah State Energy Program is administering $2.3 million in stimulus funds for Cash For Appliances rebates.  If you are a Utah resident and purchase any of the following after May 12, 2010 you may qualify for state rebates:

Clothes Washer

Room Air Conditioner

Gas Storage Water Heater

Gas Tankless Water Heater

Gas Furnace

Questar and the Utah Cash for Appliances Program offer rebates, and Rocky Mountain Power offers an incentive for replacement of the above listed appliances with energy efficient alternatives.   The rebates range from $30 to $600 depending on the number of programs for which you qualify.  Visit www.cashforappliancesutah.com to obtain forms and more information.

If you have purchased an HVAC system, installed insulation, a new roof, water heater, windows and doors or replaced a clothes washer, room air conditioner, gas storage water heater, gas tankless water heater or gas furnace,  you may be eligible for…………. FREE MONEY!!!!!!!!!!!!!!!

 

Claiming Payroll Tax Exemption for Hiring New Workers

The Internal Revenue Service has posted on its website the newly-revised payroll tax form that most eligible employers can use to claim the special payroll tax exemption that applies to many new workers hired during 2010.

Designed to encourage employers to hire and retain new workers, the payroll tax exemption and the related new hire retention credit were created by the Hiring Incentives to Restore Employment (HIRE) Act signed by President Obama on March 18.

Employers who hire unemployed workers this year (after Feb. 3, 2010, and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from the employer's share of Social Security tax on wages paid to these workers after March 18. This reduction will have no effect on the employee's future Social Security benefits. The employee's 6.2 percent share of Social Security tax and the employer and employee's shares of Medicare tax still apply to all wages.

In addition, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new hire retention credit of up to $1,000 per worker on their income tax return. Further details on both the tax credit and the payroll tax exemption can be found in a recently-expanded list of answers to frequently-asked questions about the new law now posted on IRS.gov.

How to Claim the Payroll Tax Exemption

Form 941, Employer's QUARTERLY Federal Tax Return, revised for use beginning with the second calendar quarter of 2010, will be filed by most employers claiming the payroll tax exemption for wages paid to qualified employees. The HIRE Act does not allow employers to claim the exemption for wages paid in the first quarter but provides for a credit in the second quarter. The instructions for the new Form 941 explain how this credit for wages paid from March 19 through March 31 can be claimed on the second quarter return. The form and instructions are now available for download on IRS.gov.

The HIRE Act requires that employers get a signed statement from each eligible new hire, certifying under penalties of perjury, that he or she was not employed for more than 40 hours during the 60 days before beginning employment with that employer. Employers can use new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, released last month, to meet this requirement. Though employers need this certification to claim both the payroll tax exemption and the new hire retention credit, they do not file these statements with the IRS. Instead, they must retain them along with other payroll and income tax records.

These two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify as long as they are replacing workers who left voluntarily or who were terminated for cause and otherwise are qualified employees. Family members and other relatives do not qualify for either of these tax benefits.

Businesses, agricultural employers, tax-exempt organizations, tribal governments and public colleges and universities all qualify to claim the payroll tax exemption for eligible newly-hired employees. Household employers and federal, state and local government employers, other than public colleges and universities, are not eligible.

 

Health Care Reform Bill

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act and shortly thereafter the Health Care and Education Reconciliation Act of 2010, which changes health care as we know it.  In the coming years there are many adjustments that companies need to be aware of in order to comply with the new law.

The Process

On March 21, 2010, the House voted to pass the health care reform bill that was previously passed by the Senate in December 2009, which made the bill available for the president to sign into law.  After passing the Senate bill, as is, the House then passed a "reconciliation" bill that made several changes to the law. It was then sent to the Senate, modified and passed again by the House. 

While there is a lot of information and commentary about state lawsuits and other efforts to repeal portions of the law, the fact of the matter is that on March 23, 2010, health care reform became "the law" and employers will have to begin complying.  

Is your company required to provide health insurance to employees?

The quick answer is "No," companies do not have to provide health insurance to employees. But if your company chooses not to, beginning on January 1, 2014, there may be stiff penalties to pay.  Under the new law, employers with 50 or more employees who choose not to offer qualified health coverage to employees will have to pay $2,000 per full-time employee, excluding the first 30 employees from the assessment, each year if at least one full-time employee receives income-based premiums assistance to purchase coverage through an Exchange.  The number of full-time employees can be determined by adding the number of employees who work an average of 30 hours per week in a month to the calculated number of part-time workers.  This calculation requires employers to divide the total number of hours worked in a month by employees who work fewer than 30 hours per week, by 120.

What if your company already provides health insurance?

If your company already provides health insurance coverage for employees, there are still a few things to consider and anticipate.  For example, beginning in 2014, employers who offer health benefits but have at least one employee who applies for a federal subsidy to purchase insurance on their own would be subject to an annualized penalty of $3,000 for each employee who has qualified for subsidized coverage.  Employees are eligible for the federal subsidy if the employer provided plan does not have an actuarial value of at least 60 percent or if the employee share of the premium exceeds 9.5 percent of their income.  In addition, employers may still be required to help low and middle-wage earners who opt out to buy coverage on their own.  Specifically, an employee who earns less than four times the federal poverty level, $88,200 for a family of four, will have the option to purchase coverage through the exchange.  In turn, the company would have to provide a "free-choice voucher," which must be equal to the amount paid to provide coverage to all other participating employees.  Furthermore, companies with more than 200 employees will be required to automatically enroll new hires into the health plan, but the new hire can voluntarily opt-out after enrollment if they choose.  There is no penalty for workers in a waiting period, but employers must limit the period to 90 days beginning in 2014.

Plans that were in effect on the date of enactment, March 23, 2010, are grandfathered-in and able to keep their existing coverage; however, they must still comply with the following requirements on their respective effective dates: no lifetime limits, restrictions on annual limits, restrictions on coverage rescissions, coverage of dependent adult children, coverage of dependent children with pre-existing conditions, coverage of adults with pre-existing conditions, and maximum 90 day waiting periods.

So, what should be done now?

The good news is that most of the major changes won't occur until January 1, 2014, so there isn't much that employers have to do right away.  There are several plan changes that insurance companies are required to make on your plan's renewal date, so expect to receive communication regarding these changes and communicate them to your employees and new hires appropriately.

   

Advantages of Converting a Traditional IRA to a Roth

Beginning in 2010, taxpayers will be able to convert a traditional IRA (and funds that have been rolled over from a qualified plan) to a Roth IRA, regardless of income level or filing status.   Further, the tax on the taxable income generated from a 2010 conversion can be deferred until 2011 and 2012.   This new conversion option presents both tax planning opportunities and challenges for 2009, 2010 and 2011.

An IRA conversion is treated as a taxable distribution, taxed as ordinary income at your marginal tax rate.   In effect, this accelerates the taxable income that you would eventually pay on distributions from a traditional IRA once you retire, but does so in exchange for never taxing any future appreciation in the value of your account. This can result in a significant tax advantage.   Also, unlike a regular IRA withdrawal, a conversion does not trigger an early withdrawal penalty.

Although conversion to a Roth IRA triggers immediate taxable income, Congress provided a special incentive to jumpstart Roth conversions under the new rules: In 2010, individuals will have the choice of recognizing their conversion income in that year, or averaging it over 2011 and 2012.   This allows you to pay taxes on the converted amount over two years instead of recognizing it all as income in one year.

An IRA to Roth IRA conversion should be considered by individuals who:

• Can afford the tax on the converted amounts;
• Anticipate being in a higher tax bracket in the future; and
• Have sufficient time before reaching retirement to allow assets to grow tax-free and recoup dollars that may have been lost due to the conversion tax.

There are a significant number of tax and financial considerations that come into play when determining whether to convert your traditional IRA to a Roth.   We are available to discuss with you your options and answer any questions regarding traditional IRA to Roth IRA conversions and the new 2010 planning opportunity, or any other tax planning concerns.  

 

Use this link to get the most current information on new tax legislation:

2010 Tax Legislation