The IRS has recently posted a revised payroll tax form that many eligible employers can use to receive the new payroll tax exemption.  This exemption is meant to encourage employers to hire and then retain new workers.  The exemption would apply to new hires after Feb. 3, 2010 and before Jan, 1, 2011.  The employer may qualify for a 6.2% payroll tax incentive.  Essentially this will exempt employers from paying their share of the Social Security tax on wages paid to these new hires after March 18.  There will be no effect on the employee's future Social Security benefits due to this reduction. 

Additionally, for each employee that qualifies, and is employed for at least a year, and whose wages did not significantly drop in the second half of the year, businesses may claim a new hire retention credit of up to $1,000 per worker on their tax return. 

For more information on the Hiring Incentives to Restore Employment (HIRE) act signed by President Obama March 18, see the IRS.gov, or the Questions and Answers page.

How to claim the payroll tax exemption

Employer's quarterly Federal Tax Return (Form 941) has been revised for use beginning in the second quarter of 2010.  The HIRE act does not apply to the first quarter, but applies starting in the second quarter.  Instructions for form 941 are now available on the IRS website.

The HIRE act does require that employers receive a signed statement from each eligible new employee, certifying under penalty of perjury that they were not employed for more than 40 hours during the 60 days before beginning employment with that employer.  Employers can use form W-11 to satisfy this requirement.  Although 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, but instead retain them along with other payroll and income tax records.

Employers who are adding positions to their payrolls or filling existing positions (granted previous employees left voluntarily or were terminated for cause) will benefit from these tax incentives.  Family members and other relatives do not qualify for either of these benefits. 

Businesses, agricultural employers, tax-exempt organizations, tribal governments, and public colleges and universities all qualify to claim the payroll tax exemptions.  Federal, state, and local governments (other than public colleges and universities) and household employers are not eligible for these tax benefits. 

It's summertime and many folks turn to tanning beds and salons for a little sun-kissed color, but coming July 1st, there will be an additional 10% tax on those indoor rays. 

The IRS recently issued regulations outlining the 10% excise tax on indoor tanning services, and published these regulations in the Federal Register.

In short, indoor tanning service providers will collect the 10% tax at the time of purchase, and then pay these amounts to the government quarterly with IRS Form 720, Quarterly Federal Excise Tax Return.

This tax, however, does not apply to all services.  Phototherapy services from a licensed medical professional on his or her premises, and certain physical fitness facilities offering tanning services without an additional fee, will not be subject to the Tanning Services Tax.

For more detailed information on this new tax effective July 1st, please see the IRS Frequently Asked Questions page.

The IRS, and Treasury Department welcome your comments on this issue.

A notice from the IRS regarding a "program open to projects with potential to produce new, cost-saving therapies."

As part of the Affordable Care Act, small firms (no more than 250 employees) may begin applying for certification for grants and tax credits under the Qualifying Therapeutic Discovery Project Program.   This program is available for projects with significant potential to produce cost-saving therapies, U.S. jobs, and increase U.S. competitiveness in the health care field.  It is mainly focused on projects with the goals of reducing long-term health care costs or advancing the goal of curing cancer within the next 30 years. 

This credit or grant can cover up to 50% of the cost of biomedical research (if it qualifies), or a maximum per firm of $1 million, or $1 billion overall.  The credits and grants are available for investments made in 2009 and 2010. 

To apply use Form 8942, Application for Certification of Qualified Investments Eligible for Credits and Grants Under the Qualifying Therapeutic Discovery Project Program, and its accompanying instructions.  Make sure that your applications are postmarked (Archer Group suggests sending correspondence to the IRS certified, return receipt requested) no later than July 21, 2010. 

After the Department of Health and Human Services reviews applications based on the above mentions criteria, it will select only projects that show reasonable potential to meet these goals.  These projects will be certified as eligible to receive the credit or grant.

IRS Commissioner Doug Shulman says, "This new tax credit was designed to promote medical research that could improve health and save lives," he goes on to say, "I encourage companies that are involved in this groundbreaking type of work to apply."

July 21 is coming up quickly, so make sure to review the program and its requirements and send in your application to the IRS promptly. 

Who is Eligible?

The $8,000 tax credit is available for first-time home buyers only. The law defines 'first-time home buyer' as a buyer who has not owned a principal residence during the three-year period prior to the purchase. All US citizens who file taxes are eligible to participate in the program.

Payback Provisions:

The tax credit is a true credit. IT DOES NOT HAVE TO BE REPAID. The only repayment requirement is if the homeowner sold the home within three years after the purchase.

Income Limits:

Home buyers who file as single or head-of-household taxpayers can claim the full $8,000 credit if their modified adjusted gross income (MAGI) is less than $75,000. For married couples filing a joint return, the income limit doubles to $150,000. Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit. Married couples who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit. The credit is not available for singe taxpayers whose MAGI is greater than $95,000 and married couples with a MAGI that exceeds $17,000.

Effective Dates for the Tax Credit:

First-time home buyers would receive an $8,000 tax credit for the purchase of any home on or after January 1, 2009 and before December 1, 2009. To qualify, you must actually close on the sale of the home during this period.

Tax Credit is Refundable:

A refundable credit means that if you pay less than $8,000 in federal income taxes, then the government will write you a check for the difference. For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 tax refund from the government, your refund would grow to $9,000 ($1,000 plus $8,000 from the home buyer tax credit). Buyers can take the tax credit on their 2008 or 2009 income tax return.

Types of HOmes that Qualify for the Tax Credit:

All homes, whether single-family, townhomes or condominiums apartments will qualify, provided that the home will be used as a principal residence adn the buyer has not owned a principal residence in the prior three years. This also includes newly-constructed homes.

For more details on the tax credit, visit www.federalhousingtaxcredit.com

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