www.healthcare.gov/using-insurance/employers/small-business/index.html

http://www.healthcare.gov/using-insurance/employers/small-business/index.html

Small businesses may qualify for tax credits that make it more affordable to provide health insurance to their employees. They also have some unique rights and responsibilities. Learn more here.

 

What is considered a small business?

In general, you are considered a small business if you have up to 50 employees. In some states, this will include you if you are self-employed with no employees. Contact your State Department of Insurance to find out whether this applies in your state.

Can I get tax credits for providing insurance to my employees? 

If you have up to 25 employees, pay average annual wages below $50,000, and provide health insurance, you may qualify for a small business tax credit of up to 35% (up to 25% for non-profits) to offset the cost of your insurance. This will bring down the cost of providing insurance.

Starting in 2014, the small business tax credit goes up to 50% (up to 35% for non-profits) for qualifying businesses. This makes the cost of providing insurance even lower.

Do I have to provide health insurance to my employees?

The Affordable Care Act does not require employers to provide health insurance for their employees.

The Employer Responsibility provision of the Affordable Care Act applies businesses with more than 50 full-time workers. To learn more read the Employer Bulletin on Automatic Enrollment, Employer Responsibility, and Waiting Periods.

What should the health insurance I offer to my employees cover?

It depends–states vary on what they require insurers to cover in small employer plans.Contact your State Department of Insurance for more information about small employer coverage requirements in your state.

What should I know when I am looking for health insurance for my employees?

If you are a small employer with 2-50 employees, health insurance companies cannot turn your business down based on the health status of your employees or their family members. This rule applies when you initially apply for small employer coverage and if you decide to change plans.

An insurer must also accept everyone in your group. Employees or family members (if you offer dependent coverage) with health conditions cannot be excluded from coverage.

Health insurance companies must sell you any small employer health plan they sell to other small employers in your state.

Contact your State Department of Insurance to learn more about your rights to getting and keeping small employer coverage.

What health insurance alternatives are available to my employees through the new law?

Starting in 2014, small businesses with generally fewer than 100 employees can shop in anAffordable Insurance Exchange—a new, transparent, competitive marketplace where individuals and small businesses can buy affordable, qualified health benefit plans. This gives small businesses power similar to what large businesses have to get better choices and lower prices for employee coverage.

Exchanges will offer more choices of high-quality coverage and lower prices.  Exchanges will offer a choice of plans that meet certain benefits and cost standards.

  • Small businesses will benefit from insurance with lower administrative costs compared to the choices available in the small business market today because they will be able to pool together.
  • Limits on insurance rating, such as no more rating based on employees’ health status or gender, will lower premiums for many small businesses.
  • The small business tax credits and the new competition promoted by Affordable Insurance Exchanges will help keep the cost of insurance down.

Do I have to pay more based on the health status of my group?

Most states, but not all, limit how much premiums can vary due to employees’ health status and other factors. Even within these limits, premiums can be significantly higher if someone in a small employer plan has a serious health condition.

Contact your State Department of Insurance for more information about small employer rating rules in your state.

Under the Affordable Care Act, this will change.  Starting in 2014, insurers won’t be allowed to charge more based on the health status of your group or the gender of your employees. There will also be limits on how much premiums can vary based on age.

Can an insurer cancel my small employer plan because one of my employees gets sick?

No, your insurance for the group (or for any member of the group) cannot be canceled because someone in your group becomes sick. This is called “guaranteed renewal.”

Do I have to report the cost of insurance in my employees’ W-2 forms?

Employers do not have to report the cost of insurance on employee W-2s in 2011. This reporting is optional in 2011.

The reporting requirement is intended to be informational and provide employees with greater transparency into health care costs. The amounts reported are not taxable.

Learn more about the W-2 reporting deferral from the IRS.

The Affordable Care Act and Small Business

Myth vs. Fact- Myth #1: All Businesses Will Be Required to Provide Health Insurance to All of Their Employees

http://www.sba.gov/community/blogs/community-blogs/health-care-business-pulse/myth-vs-fact-myth-1-all-businesses-will-b

by Meredith K. Olafson, Meredith K. Olafson is Senior Policy Advisor for the U.S. Small Business Administration

February 20, 2013, 4:00 pm

As a business owner, it’s important to understand how the Affordable Care Act can affect your business. However, with so many misconceptions about how the Affordable Care Act works, this can be difficult.  To clarify the myths versus facts, we’re launching a new blog series called “Myth vs. Fact: The Affordable Care Act and Small Business”.

This blog covers one of the most common myths we’ve seen out there:

Myth: All businesses will be required to provide health insurance to all of their employees.

Fact: Employers are not required to provide coverage to their employees under the Affordable Care Act.  However, starting in 2014, some businesses that do not offer health coverage to their full-time employees may be subject to a shared responsibility payment under the health care law.

How do I know if I may be subject to an Employer Shared Responsibility Payment?

Businesses with 50 or more full-time or full-time equivalent (FTE) employees that do not offer affordable health insurance that provides a minimum level of coverage to their full-time employees (and dependent children under the age of 26 starting in 2015) may be subject to a shared responsibility payment if at least one of their full-time employees receives a premium tax credit in an Affordable Insurance Exchange, or Marketplace.   For the purposes of these provisions, a full-time employee is one who is employed an average of at least 30 hours per week.

Businesses will not be affected by these provisions if they already offer affordable health coverage that provides a minimum level of coverage to their full-time employees, which is the vast majority of these businesses.

Businesses with fewer than 50 full-time or FTE employees are generally not affected by these provisions.  However, it’s important to know that if companies have a common owner or are otherwise related, their total combined number of employees is used to determine whether each separate company is subject to these provisions — even if none of the member companies individually employ 50 or more full-time or FTE employees.

How can I find out if I meet the threshold number of 50 or more full-time or FTE employees?

To assist employers, the IRS has developed a helpful set of Q&As on the Employer Shared Responsibility provisions. The IRS has also issued a set of proposed rules   relating to the Employer Shared Responsibility provisions, and is accepting written or electronic comments by or before March 18, 2013.

Understand the Affordable Care Act as a Small Business Owner

What does the health care law mean to you? Check out these resources that explain the key provisions of the law plus an overview of what is changing and when.

For a clear overview of how the law impacts small businesses, the Small Businesses and the Affordable Care Act guide breaks down the top things you need to know, including information about the following:

The Small Business Tax Credit and your eligibility to claim it.

Affordable Insurance Marketplaces, known as the Small Business Health Options Program (SHOP), will open on January 1, 2014 and give small employers buying power—similar to what large businesses have to get better choices and lower prices.  The SHOP Marketplaces will work with new insurance reforms and tax credits provided by the Affordable Care Act to help lower barriers to offering health insurance that small employers face.  Visit Healthcare.gov’s small business landing page for the latest information on SHOP, and review the get-ready checklist for small business owners.  Enrollment in SHOP begins on October 1, 2013.

This useful Small Business Q&A also helps you understand your rights and responsibilities as a small business owner.

Find Healthcare Insurance Options for Your Small Business

Looking for insurance for yourself or your employees? Healthcare.gov’s Insurance Finder organizes and presents information and pricing collected from insurers to help you better understand your options. Enter some basic data and the tool will filter your options accordingly.

http://www.sba.gov/community/blogs/online-tools-help-you-find-and-price-small-business-health-care-insurance-options

www.sba.gov/healthcare

Healthcare.gov

 

Strategies to Max Out Social Security Benefits

Which Social Security claiming strategy will pay the most over a lifetime:

Much of my mail these days seems to start with the same warm greeting: “What planet are you from?” That’s invariably the case when I suggest that readers consider ways to maximize Social Security benefits instead of grabbing a check at age 62, as about half of all retirees do.I know: Waiting to claim Social Security until your mid-60s or later isn’t easy. Many people need the cash, are fearful that the program might change (or collapse), or are trying to avoid tapping their savings for as long as possible. But two trends make this a good time to look at “claiming strategies” for Social Security and help illustrate just how much money is involved.

First, a recent report from the Census Bureau highlights a startling fact: The 90-plus population is projected to quadruple in size between now and 2050 — meaning that living into your tenth decade is something to factor into Social Security planning. Second, a growing number of Web-based tools now allow you to run dozens of possible claiming strategies — and can recommend how to maximize benefits.

For the examples below, I asked the folks at SocialSecuritySolutions.com in Leawood, Kan., for help; I like that the company’s lead researcher, Baylor University finance professor William Reichenstein, has written extensively about how best to tap nest eggs. (Using the site’s tool runs between $20 and $125, depending on how much personal attention you want interpreting your report.) Given the stakes, I suggest comparing results from a few different sites. You’ll find free tools at the Social Security Administration‘s site, Aarp.comand AnalyzeNow.com; another site, MaximizeMySocialSecurity.com, charges $40.Now some numbers. First, we need a way of measuring why one claiming strategy might be better than another. I’m going to use cumulative lifetime benefits as a yardstick. In other words, I want to see, given a specific starting age and life expectancy, which claiming strategy will pay me and a spouse the most money over a lifetime (or, considering there are two of us, lifetimes). You also could look at monthly income, but it can be misleading. More on that in a moment.

We’ll start with a simple example. Joe and John can begin collecting $1,500 monthly from Social Security at age 62, or $2,640 a month at age 70. Let’s say both live to 92. If Joe claims benefits at 62, his lifetime total will be $540,000. If John waits until 70, he’ll net $696,960 — almost $157,000 more.

If you look solely at monthly income, claiming benefits at 62 looks smart; Joe is getting $1,500 a month for eight years, and John is getting zilch. But again, “longevity risk should be part of your planning,” says William Meyer, founder and managing principal of Social Security Solutions. What are the odds that you will live to 85 or 90 — or longer? The answer for many: increasingly good.

Now let’s look at a husband and wife: Bob and Carol, ages 62 and 58. Bob is scheduled to receive $2,000 at his full retirement age of 66, while Carol is scheduled to receive $1,600 at her full retirement age, also 66. Each, of course, can claim Social Security at age 62. If they do so — and Bob lives until 83 and Carol lives until 90 — their cumulative benefits will be $840,600.

But Social Security Solutions offers a more lucrative — and slightly more complex — strategy. At his full retirement age, Bob claims a spousal benefit of $800. (Yes, Social Security allows this.) Carol, meanwhile, claims a benefit (based on her earnings) of $1,200 at age 62. Finally, Bob, at age 70, switches to a monthly benefit of $2,640, based on his earnings history, a move that falls under “delayed retirement credits.” In this case, the couple’s lifetime benefits will total $1,043,520, a gain of almost $203,000 over the let’s-jump-in-the-pool-as-quickly-as-possible approach.

The other interesting piece of these two strategies: survivor benefits. If both spouses claim benefits at age 62, Carol — when Bob dies — will be eligible for a survivor’s benefit (under Social Security’s rules) of $1,650 a month. But under the second claiming strategy, she would get a survivor’s benefit of $2,640, an extra $1,000 each month.

Now, consider the options for a woman, age 60, who loses her husband. Her benefit at full retirement age is $1,400; his would have been $2,000. She could begin collecting a widow’s benefit of $1,430 at age 60. But it might be better for her to pursue a different strategy — claiming a reduced benefit, based on her earnings history, of $1,050 at age 62 and switching to a widow’s benefit of $2,000 at age 66. The difference in total benefits if she lives until age 89: an extra $112,000.

Yes, the numbers can get a little head-spinning. But I hope these examples give you an idea about how much money might be forfeited if you claim benefits early — and how many claiming options are available. I recently heard this from Mark Ellingson, a retiree in Lake George, Colo.: “Take benefits [at age 62] while you still have good health and can enjoy life.” That’s tough to argue with. But please, do consider the alternatives.

http://www.smartmoney.com/retirement/planning/strategies-to-max-out-social-security-benefits-1329243329517/

Reporting Income Payments Using Form 1099-MISC

Form 1099-MISC is used to report payments made in a trade or business.

By , About.com Guide     http://taxes.about.com/od/businesstaxes/qt/1099-Misc-Reporting-for-Miscellaneous-Payments.htm

Form 1099-MISCis used to report certain types of payments made in the course of a trade or business. If you’re in business or self-employed, you may need to submit this report to both the Internal Revenue Service and the person or business whom you paid.

When is Form 1099-MISC Required?

Businesses will need to fill out a Form 1099-MISC for persons, vendors, subcontractors, independent contractors, and others in the following circumstances:

$600 or more per year is paid for

  • cash payments to fishermen
  • crop insurance proceeds,
  • medical and health care payments,
  • prizes and awards,
  • proceeds paid to attorneys,
  • rents,
  • services (including parts and materials), and
  • other types of payments not covered by another information reporting document.

$10 or more per year is paid for

  • broker payments in lieu of dividends or tax-exempt interest, and
  • royalties

Reporting such payments is required if the recipient of the payment is not a corporation — for example, when the recipient is an individual, partnership, a limited liability company treated as a partnership or sole proprietorship. Payments made to corporations are required in the case of medical and health care payments and in the case of legal fees paid to attorneys. Other types of payments made to corporations may be reported using Form 1099-MISC, but is not required. 

Report Payments Made by Cash or Check, but Not Payments Made by Credit Card

Starting with the 2011 tax year, the IRS is instructing businesses that payments made via credit card and other third party payment processing services need not be reported on Form 1099-MISC. Refer to the Instructions for Form 1099-MISC1, especially the What’s New2section. 

Expanded 1099-MISC Reporting Starting in 2011 for Rental Property Owners Has Been Repealed

Rental property would have needed to issue a 1099-MISC for payments relating to their rental properties beginning in the year 2011, but this requirement has been repealed by the Comprehensive 1099 Taxpayer Protection and Replacement of Exchange Subsidy Overpayments Act of 20113

Expanded 1099-MISC Reporting Starting in 2012 Has Been Repealed

1099 reporting would have been expanded starting with the year 2012, but this provision has also been repealed by the Comprehensive 1099 Taxpayer Protection and Replacement of Exchange Subsidy Overpayments Act of 2011. Prior to repeal, reporting would have been expanded to include payments made to corporations and as well as to include payments for goods and property. The 1099-MISC expansion was originally legislated as part of the health care reform package4

 

Steps to Take to Prepare for 1099-MISC Forms

You should request that your vendors, contractors and other payment recipients submit to you a Form W-95. The W-9 will provide you with the legal name, address and taxpayer identification number for the vendor, which is the information you will need when preparing any 1099-MISC forms.You should also keep track of your payments in your bookkeeping system. You will need to know whether the payment falls under any of the categories listed above for reportable payments, whether your payments to a particular recipient reaches the $10 or $600 threshold for reporting, and finally you’ll need to know the exact amount you paid the recipient for the year.

 

Penalties for Filing Form 1099-MISC Late

The following penalties will be in effect for the year 2011:

  • $30 penalty for filing a 1099 not more than 30 days late;
  • $60 penalty for filing a 1099 more than 30 days late and before August 1;
  • $100 penalty for filing a 1099 on or after August 1;
  • $250 penalty for intentional failure to file.

These Form 1099-MISC penalties were increased as part of the Small Business Jobs Act6, and have not been repealed.

Deadlines for 1099-MISC Forms

  • Provide the recipient with his or her copy of the Form 1099-MISC by January 31 reporting income for the previous calendar year.
  • Mail the Form 1099-MISC to the IRS by February 28.
  • Or electronically file 1099s with the IRS by March 31.

Businesses can request a 30-day extension to file 1099s with the IRS using Form 8809. An extension does not permit additional time for providing the 1099 to the recipient. 

Form 1099-MISC Tax Resources

Properly Defined Dependents

Properly Defined Dependents Can Pay Off At Tax Time

By Kay Bell • Bankrate.com

Your son is off at college. Can you still claim him as a dependent? The answer for most parents is “yes.” But, as is often the case with tax questions, determining who can be claimed as a dependent is not always a clear-cut exercise.

Dependent claims aren’t limited to children. An adult relative could qualify as a taxpayer’s dependent as long as he or she meets certain Internal Revenue Service conditions.

Dependency tests that must be met

By a child By a relative
Relationship
Residency
Age
Support
Citizenship
Joint return
Not a qualifying child
Relationship/Household member
Gross income
Support
Citizenship
Joint return

Making sure the requirements are met is critical, because dependents can help reduce your tax bill. In many cases, you can claim certain tax-cutting deductions and credits related to a dependent. The key tax breaks associated with a child are the child tax credit, the child and dependent care credit and the earned income tax credit.

Even if these added tax credits don’t apply to your situation, a dependent named on your return can still trim your taxes. Each dependent directly translates into an exemption, a specific dollar amount, adjusted annually for inflation, that you deduct from your adjusted gross income.

Child dependent tests

In order to claim a child as your dependent, the youngster must now meet four key tests:

  • Relationship test: The child must be your child, either by birth, adoption or by being placed in your home as a foster child. Even if the adoption isn’t yet final, if the child is living with you and the process is under way, it counts. A dependent child can also be your brother, sister, stepbrother, stepsister or a descendent of one of these relatives.
  • Residency test: The child must live with you for more than half of the year. If the youth is away temporarily for special circumstances, such as for school, vacation, medical treatment, military service or detention in a juvenile facility, these particular absences still count as time lived at home. A child who was born or died during the year is considered to have lived with you for the entire year if your home was the child’s home for the entire time he or she was alive during the year.
  • Age test: A child must be under a certain age depending on the particular tax benefit. For the dependency exemption, the child must be younger than 19 at the end of the year. However, a youth who was a student at the end of the year can be claimed as long as he or she is younger than age 24. There is no age limit if the individual is permanently and totally disabled.
  • Support test: This refers to the youngster’s contributions, not those of adults in the family. To qualify as a dependent, the child cannot provide more than half of his or her own support during the year.

The support issue usually is not a problem. However, if the child is a successful model, for example, he or she could bring in substantial income and therefore might not be able to be claimed as a dependent under this test. Even then, as long as the parents provide more than the youngster is bringing in, then the child would still qualify.

Even after the child meets the four qualifying tests, there are two other considerations before he or she can be claimed as a dependent for exemption purposes.

The youngster generally must also be a U.S. citizen, U.S. national or a resident of the United States, Canada or Mexico. An exception applies for certain adopted children.

And if married, the child cannot file a joint return unless the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns.

Other dependent relatives

Other relatives also might be your tax dependent if they meet similar qualifying tests.

The first requirement is, obviously, that the person not be your qualifying child for tax purposes. The person also cannot be considered the dependent child of anyone else.

The person must live with you for the full tax year or be related to you. Relatives who do not have to reside in your home but who can be claimed as tax dependents include parents, siblings, grandparents, nieces and nephews, aunts and uncles and in-laws.

Your dependent relative must earn less than the personal exemption amount during the year, and he or she must get more than half of his or her total support for the year from you.

Qualifying relatives also must meet the same citizenship and joint tax filing requirements as do qualifying children.

Tiebreaker guidelines

Sometimes a child can be the qualifying child of more than one person. However, because the IRS only allows one taxpayer to claim the same youngster, all eligible taxpayers must decide who will claim the child and any ensuing tax benefits.

If you can’t agree and both of you list the youth on separate returns, expect the IRS to disallow one or more of the claims using tiebreaker rules.

Tiebreaker rules

  • First, the agency looks at whether only one person is the child’s parent. This would be the case, for example, if one credit claimant is a stepparent. The parent would get the credit.
  • If both taxpayers are the child’s parents, then the parent with whom the child lived the longest during the tax year would be allowed the credit. If the child lived with both separated parents for an identical amount of time, the credit would go to the parent with the highest adjusted gross income.
  • Finally, if neither person is the child’s parent, the IRS would then allow the credit to the filer with the highest eligible AGI.

If several children are involved in a family situation where two taxpayers may claim them, the adults can decide to share the children for tax purposes. For example, you and your three children live with your mother. You can claim one child as a dependent and your mother can claim the other two. Again, if such a sharing agreement cannot be reached, the tiebreaker rules would come into play.

Final exemption factors

A spouse is never considered a dependent. However, you can claim an exemption for your husband or wife as long as you file a joint return.

You also are allowed an exemption deduction for yourself. But if you file a return while being claimed as a dependent on someone else’s 1040, the IRS warns that you won’t be able to claim a personal exemption on your own return.

Details and relationship dependency examples are available in IRS Publication 501, Exemptions, Standard Deduction and Filing Information.
http://www.bankrate.com/system/util/print.aspx?p=/finance/taxes/properly-defined-dependents-can-pay-off-1.aspx&s=br3&c=taxes&t=guide&e=1&v=1#ixzz1jpa7Xkuo

Missouri Sales and USE TAX

Sales Tax

Sales tax is imposed on retail sales of tangible personal property and certain services. All sales of tangible personal property and taxable services are generally presumed taxable unless specifically exempted by law. Persons making retail sales collect the sales tax from the purchaser and remit the tax to the Department of Revenue. The state sales tax rate is 4.225%. Cities, counties and certain districts may also impose local sales taxes as well, so the amount of tax sellers collect from the purchaser depends on the combined state and local rate at the location of the seller. The state and local sales taxes are remitted together to the Department of Revenue. Once the seller remits sales tax to the department, the department then distributes the local sales taxes remitted by the sellers to the cities, counties and districts.

Use Tax

Use tax is imposed on the storage, use or consumption of tangible personal property in this state. The state use tax rate is 4.225%. Cities and counties may impose an additional local use tax. The amount of use tax due on a transaction depends on the combined (local and state) use tax rate in effect at the Missouri location where the tangible personal property is stored, used or consumed. Local use taxes are distributed in the same manner as sales taxes.

Unlike sales tax, which requires a sale at retail in Missouri, use tax is imposed directly upon the person that stores, uses, or consumes tangible personal property in Missouri. Use tax does not apply if the purchase is from a Missouri retailer and subject to Missouri sales tax.

Missouri cannot require out-of-state companies that do not have nexus or a “direct connection” with the state to collect and remit use tax. If an out-of -state seller does not collect use tax from the purchaser, the purchaser is responsible for remitting the use tax to Missouri.

A seller not engaged in business is not required to collect Missouri tax but the purchaser in these instances is responsible for remitting use tax to Missouri. A purchaser is required to file a use tax return if the cumulative purchases subject to use tax exceed two thousand dollars in a calendar year.

Any vendor and its affiliates selling tangible personal property to Missouri customers should collect and pay sales or use tax in order to be eligible to receive Missouri state contracts, regardless of whether that vendor or affiliate has nexus with Missouri.

Section 34.040.6 states, “The commissioner of administration and other agencies to which the state purchasing law applies shall not contract for goods or services with a vendor if the vendor or an affiliate of the vendor makes sales at retail of tangible personal property or for the purpose of storage, use, or consumption in this state but fails to collect and properly pay the tax as provided in chapter 144, RSMo. For purposes of this section, “affiliate of the vendor” shall mean any person or entity that is controlled by or is under common control with the vendor, whether through stock ownership or otherwise.”

Sales Tax Rate Changes

Access the latest sales and use tax rate changes for cities and counties. Local sales taxes are effective on the first day of the second calendar quarter after the Department of Revenue receives notification of the rate change (January, April, July, October). Local taxes can also have an expiration date, lowering the sales or use tax rate for that particular city or county. Expirations also take place on the first day of a calendar quarter (January, April, July, October). The Department of Revenue notifies every business impacted by any local sales or use tax rate change during the month prior to the effective date of the change.

http://dor.mo.gov/business/sales/

Capital Gains Rates

Long Term Capital Gains Rates  0%, 5%, 15%, 25% or 28% depending on income level thru 12-31-2012

A look at the many CAPITAL GAINS RATES by Kay Bell • Bankrate.com • Bankrate’s Tax Guide

Money gurus are always preaching long-term investing. Not only will that give you a better shot at earning more, it’ll also get you a lower tax rate when you sell.

But exactly what capital gains tax rate you pay depends on several things, including when you bought the asset, when you sold it, your overall income level, and sometimes, what tax-code changes were made in the meantime.

Currently, capital gains are at historic lows. Some taxpayers in the two lowest tax brackets could end up without any capital gains tax bill. That’s right, zero capital gains for some filers.

Others will face tax rates of just 5 percent. Most investors will see their gains taxed at 15 percent. And 25 percent and 28 percent rates apply in special circumstances.

One thing all these tax levels do have in common is that they are known as long-term capital gains. This means they apply to assets that you hold for at least 366 days — more than one year.

The tax appeal of the long-term capital gains tax rate is that it is generally much lower than what you pay on your regular income. In fact, it is a taxpayer’s income level that generally determines which capital gains rate applies. And if your profit pushes you into a higher bracket, you could possibly be taxed at a combination of rates. And you could face yet another rate depending on the type of property you sell.

Zero capital gains taxes for some

On Jan. 1, 2008, the best of all possible tax rates — zero percent — took effect for investors in the 10 percent and 15 percent income tax brackets.

Previously these taxpayers had to pay Uncle Sam 5 percent of their long-term capital gains. Now any long-term assets they sell will be exempt from capital gains taxes.

Zero percent capital gains tax rate applies to

Filing status Maximum taxable income
Single or Married filing separately $34,000
Married filing jointly $68,000
Head of household $45,500

To qualify for the zero rate, you must own the asset for more than one year before you sell it.

While lower-income individuals aren’t typical investors, this tax benefit could help out folks such as retirees who have little or no taxable income. And the children of older individuals could combine the annual gift exclusion ($13,000 in 2010 and 2011) with this capital gains break and give appreciated long-term assets to their older parents.

15 percent tax rate for most

The zero percent rate is just the latest in a series of investor-friendly tax changes enacted during the George W. Bush administration. Prior to his taking office, investors whose overall income put them in the top four income tax brackets faced a long-term capital gains rate of 20 percent, while lower-income investors paid capital gains taxes of 10 percent.

Tax-law changes in May 2003, however, lowered the rates by 5 percent each, with the lower rate, as noted earlier, eventually being zeroed out in 2008. The lower rates were extended by the December 2010 tax bill through the 2012 tax year.

The changes have had the most effect on investors in the higher income ranges – 25 percent to 35 percent tax brackets. These individuals now find their capital gains taxed at 15 percent. This lower rate also applies to some dividends that stocks and mutual funds pay account holders. When you hear “lower capital gains rate,” it generally means this 15 percent level, because there are few investors with incomes low enough to qualify solely for the 5 percent, now zero percent, rate.

Remember, these rates are for long-term capital gains. In most cases, that means you have to hold an asset for more than a year before you sell it. If you cash it in sooner, you’ll be taxed at the short-term rate, which is the same as your ordinary income tax level and could be as high as 35 percent on 2010 returns.

25 percent capital gains rate

While the 5 percent (now zero percent) and 15 percent rates have received the most attention, at least on Capitol Hill, for the last few years there have been several other categories of capital gains taxes.

A rate of 25 percent applies to part of the gain from selling real estate you depreciated. Basically this keeps you from getting a double tax break. The Internal Revenue Service first wants to recapture some of the tax breaks you’ve been getting via depreciation throughout the years. You’ll have to complete the work sheet in the instructions for Schedule D to figure your gain (and tax rate) for this asset, known as Section 1250 property. More details on this type of holding and its taxation are available in IRS Publication 544, Sales and Other Dispositions of Assets.

28 percent capital gains rate

Two categories of capital gains are subject to this rate: small business stock and collectibles.

If you realized a gain from qualified small-business stock that you held more than five years, you generally can exclude one-half of your gain from income. The remainder is taxed at a 28 percent rate. If you’ve already hired a tax professional to help you sort out the 25 percent rate on depreciable property, she can help you figure this tax, too. Or you can get the specifics on gains on qualified small business stock in IRS Publication 550, Investment Income and Expenses.

If your gains came from collectibles rather than a business sale, you’ll still pay the 28 percent rate. This includes proceeds from the sale of a work of art, antiques, gems, stamps, coins, precious metals and even pricey wine or brandy collections.

More rate changes to come?

The capital gains tax rates are set through Dec. 31, 2012, but there continues to be a push by some in Washington, D.C., to return at least the top capital gains tax rate to the prior 20 percent level.

That decision will hinge in large part on the economy and future congressional and presidential elections.

With Congress continually tweaking investment tax laws, what’s an investor to do? Most financial experts say to take advantage of today’s lower rates while they are around and when they fit into your portfolio plans.

But don’t forget about the Dec. 31, 2012, deadline. And definitely keep an eye on federal tax-law writers in the interim.

http://www.bankrate.com/system/util/print.aspx?p=/finance/money-guides/capital-gains-tax-rates-1.aspx&s=br3&c=taxes&t=guide&e=1&v=1#ixzz1YbpRQfhz

Employer Mandatory Posters

Mandatory Posters in the workplace

Various state and federal laws require employers to display certain posters for the benefit of both employees and customers informing them of key provisions in the law. While not limited to, below you will find other required posters pertaining to a broad spectrum of business and industry, including housing and public accommodations.

Posters Required by the Federal Government http://www.dol.gov/compliance/topics/posters.htm

Posters Required by the State of Missouri http://labor.mo.gov/posters/

The following only describes required posters requested of the Missouri Department of Labor and Industrial Relations.

  1. Notice to Workers Concerning Unemployment Benefits (MODES-B-2). (Revised:09/09)

    Required by Missouri Revised Statutes, Section 288.130 and Division of Employment Security Code of State Regulations 8 CSR 10-3.070.

  2. Workers’ Compensation Law (WC-106). (Revised:04/10)

    *This poster prints out on two sheets of paper (8.5 x 11) that can then be taped together and used as the poster.

    Workers’ Compensation Law (WC-106-Tabloid size). (Revised 04/10)

    **For best use, print out the poster either on one sheet of 11 X17 paper or two pieces of 8.5 X 11 (standard size) and tape pieces together, side by side. Printing this poster by using only one 8.5 X 11 paper (tabloid size) makes it challenging for the visually impaired to read.

    Required Missouri Revised Statutes, Section 287.127.

  3. Discrimination in Employment (MCHR-9). (Revised:01/11)*This poster prints out on two sheets of paper (8.5 x 11) that can then be taped together and used as the poster.

    Discrimination in Employment (MCHR-9-Tabloid size). (Revised:01/11)

    **For best use, print out the poster either on one sheet of 11 X17 paper or two pieces of 8.5 X 11 (standard size) and tape pieces together, one on top of the other. Printing this poster by using only one 8.5 X 11 paper (tabloid size) makes it challenging for the visually impaired to read.

    Every employer, labor organization, employment agency, or other business or establishment covered by Chapter 213, RSMo shall post the Commission’s equal employment poster in a place where other employee notices are posted or in a conspicuous place where employees will have access to it. Required by Missouri Revised Statutes, Section 213.020.2 and Code of State Regulations 8 CSR 60-3.010.

  4. Missouri Minimum Wage Law (LS-52). (Revised:07/09)

    Required by Missouri Revised Statutes, Section 290.522.

  5. Employer’s Employing Workers Under the Age of 16 List (LS-43). (Revised:04/10)Missouri Revised Statutes Section 294.060.1 requires employers who employ youth under the age of 16 to post LS-43 Youth Employment List. (Must be printed on 8.5 x 14 paper to fit content on one page)
  6. Discrimination in Housing (MCHR-6). (Revised:01/11)*This poster prints out on two sheets of paper (8.5 x 11) that can then be taped together and used as the poster.

    Discrimination in Housing (MCHR-6-Tabloid size). (Revised:01/11)

    **For best use, print out the poster either on one sheet of 11 X17 paper or two pieces of 8.5 X 11 (standard size) and tape pieces together, one on top of the other. Printing this poster by using only one 8.5 X 11 paper (tabloid size) makes it challenging for the visually impaired to read.

    The Rules and Regulations of the Missouri Commission on Human Rights require employers in the business of sale or rental of housing to post MCHR-6 Discrimination in Housing.

  7. Discrimination in Public Accommodations (MCHR-7). (Revised:01/11)*This poster prints out on two sheets of paper (8.5 x 11) that can then be taped together and used as the poster.

    Discrimination in Public Accommodations (MCHR-7-Tabloid size). (Revised:01/11)

    **For best use, print out the poster either on one sheet of 11 X17 paper or two pieces of 8.5 X 11 (standard size) and tape pieces together, one on top of the other. Printing this poster by using only one 8.5 X 11 paper (tabloid size) makes it challenging for the visually impaired to read.

    The Rules and Regulations of the Missouri Commission on Human Rights require employers doing business in places open to the public to post MCHR-7 Discrimination in Public Accommodations.

The Social Security earnings test for people at full retirement age

Updated 06/03/2011    www.ssa.gov

What is the earnings test for people at full retirement age (FRA)?

Only earnings before the month of FRA count towards the earnings test.  Earnings in the month you reach FRA and after do not count towards the earnings test.

The Senior Citizens’ Freedom To Work Act of 2000 eliminated the Social Security annual earnings test and the foreign work test in and after the month a person attains FRA. The FRA was age 65 in 2000 through 2002, but began increasing beginning in 2003.

If you are under FRA when you start getting your Social Security payments, we will deduct $1 in benefits for each $2 you earn above the annual limit.  In 2011, the limit is $14,160; for 2010, the limit also was $14,160.  In the calendar year you attain FRA, we will deduct $1 in benefits for each $3 you earn above a higher annual limit up to the month of FRA attainment.

For 2011, the limit is $37,680; for 2010, the limit also was $37,680.

Examples: When you work and get Social Security at the same time Updated: January 04, 2011
You can continue to work and earn above the annual earnings limit and still get some of your benefits.Let’s look at a couple of examples: You are receiving Social Security retirement benefits every month in 2011 and you

You work and earn $23,760 ($9,600 over the $14,160 limit) during the year. Your Social Security benefits would be reduced by $4,800 ($1 for every $2 you earned over the limit), but you would still receive $4,800 of your $9,600 in benefits for the year. ($9,600 – $4,800 = $4,800)

  • Reach full retirement age in August 2011. You are entitled to $800 per month in benefits ($9,600 for the year).

You work and earn $62,000 during the year, with $39,690 ($2,010 over the 37,680 limit) of it in the 7 months from January through July.

  • Your Social Security benefits would be reduced through July by $670 ($1 for every $3 you earned over the limit). You would still receive $4,930 out of your $5,600 benefits for the first 7 months (January through July). ($5,600 – $670 = $4,930)
  • Beginning in August 2011, when you reach full retirement age, you would receive your full benefit ($800 per month), no matter how much you earn.

      When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net profit if you’re self-employed. We include bonuses, commissions and vacation pay. We don’t count pensions, annuities, investment income, interest, veterans or other government or military retirement benefits.

      Also, as long as you continue to work and receive benefits, we will check your record every year to see whether the additional earnings will increase your monthly benefit. If there is an increase, we will send you a letter telling you of your new benefit amount.

      In addition, after you reach full retirement age, we will recalculate your benefit amount to give you credit for any months in which you did not receive a benefit because of your earnings. We will send you a letter telling you about any increase in your benefit amount.

      If you are eligible for retirement benefits this year and are still working, you can use the SSA earnings test calculator to see how your earnings could affect your benefit payments.

      http://www.socialsecurity.gov/OACT/COLA/RTeffect.html

      Health Care Tax Credit for Small Employers

      Tuesday May 11, 2010             http://taxes.about.com/od/businesstaxes/qt/Small-Business-Health-Care-Tax-Credit.htm

      Small businesses may qualify for a new tax credit worth up to 35 percent of the cost of employer-paid health insurance premiums. This health care tax credit1 was enacted as part of the massive health care reform bill2 passed, and the credit is available starting in the year 2010.

      As with all tax credits, there are limitations as to which small businesses qualify, as well as rules for calculating the actual amount of the tax credit. In general, eligible small employers can claim a federal tax credit based on health insurance premiums paid by the employer on behalf of their employees, up to a maximum credit of 35% of premiums paid. Eligible small businesses are those with fewer than full-time 25 employees (or full-time equivalents), average annual wages under $50,000 per employee, and paying 50% or more of the health benefit.

      Health Care Tax Credit Amounts
      • 35% of eligible premiums — for 2010 through 2013
      • 50% of eligible premiums — beginning in 2014
      Qualifying for the Health Care Tax Credit

      There’s a three-part test for see if a small business qualifies for the health care tax credit:

      • The business must have less than 25 full-time equivalent employees
      • The average wage of employees must be less than $50,000 per full-time equivalent employee
      • Health insurance premiums must be paid through a “qualifying arrangement”
      No Tax Credit for Owners of the Business

      Small businesses cannot take a tax credit for insurance premiums paid for owners of the business. This means that owners of corporations, partners in a partnership, and sole proprietors. For small businesses structured as a C-corporation, no tax credit is available for employees who own 5% or more of the corporation. For S-corporations, no tax credit is available for employees who own 2% or more of the S-corporation. Partners, members of LLC treated as a partnership, owners of a single-member LLC, S-corporation shareholders owning 2% or more of an S-corporation, and sole proprietors are all treated as self-employed persons for health insurance purposes, and are eligible for the self-employed health insurance deduction instead of the tax credit.

      Employer Must Pay at Least Half of the Insurance Premiums

      So far the IRS is applying the term “qualifying arrangement” to any scenario in which the small business pays at least half of the health insurance premiums for its employees. In a set of frequently asked questions, the IRS clarified that this 50% test applies only to employee-only health coverage. So a scenario is which the employers pays half of the employee-only coverage, and the employee pays all the premiums for covering spouse and children would still qualify for the tax credit.

      3 Limitations That Reduce the Health Care Tax Credit

      Small employers may not qualify for the full amount of the credit. The 35% credit amount represents a maximum amount for the tax credit. The credit must be reduced (or phased out) in the following circumstances:

      • The number of full-time equivalent employees exceeds ten,
      • Average annual wages exceeds $25,000 per full-time equivalent, or
      • Actual health insurance premiums exceed average premiums paid for health coverage in the employer’s area.

      In Revenue Ruling 2010-13 (pdf, 4 pages), the IRS has set forth average health insurance premiums by state that can be used for 2010. Average health insurance premiums will be determined by the Department of Health and Human Services and published by the IRS.

      Claiming the Health Care Tax Credit

      The IRS has not yet released any forms or instructions for claiming the credit. It’s clear, however, that the tax credit will be reported on the business’s income tax return. The health care credit will reduce any income tax. The credit is non-refundable (meaning it can reduce income tax to at most zero). The credit cannot offset payroll tax or self-employment tax liabilities for small business owners.

      Can Businesses Take a Deduction for Health Insurance Premiums?

      Small businesses can take both a deduction for health insurance premiums as well as the health care tax credit. However, the amount of the deduction must be reduced by the amount of the tax credit.

      Planning Tips for the Health Care Tax Credit

      Small businesses should review their accounting systems to make sure they are keeping track of employer-paid and employee-paid health insurance premiums. This will become vitally important as employers will need to report the value of health insurance benefits on employees’ W-2 Forms starting in 2011.

      Additionally, business owners will want to review how they structure their health benefits. For example, owners may want to revise what percentage of health insurance premiums they want to pay so as to be eligible for the tax credit.

      Business may also want to calculate different scenarios such as paying 50% of the insurance premiums, or 60%, or 100%, or taking only the deduction instead of the tax credit. This could help reveal the most cost-efficient way to structure health benefits for employees.

      More information:

      1. http://taxes.about.com/od/businesstaxes/qt/Small-Business-Health-Care-Tax-Credit.htm
      2. http://taxes.about.com/b/2010/03/30/tax-provisions-in-the-health-care-reform-law.htm
      3. http://taxes.about.com/od/businesstaxes/qt/Small-Business-Health-Care-Tax-Credit.htm
      4. http://biztaxlaw.about.com/od/healthcarebusinesstax/f/smallbiztaxcredit.htm
      5. http://biztaxlaw.about.com/od/healthcarebusinesstax/tp/healthcareplanlist.htm

      When Do the Health Care Reform Provisions Go Into Effect for Businesses?

      By Jean Murray,     http://biztaxlaw.about.com/od/healthcarebusinesstax/f/hclawtimeline.htm?nl=1

      President Obama signed into law HR 3590, the Patient Protection and Affordable Care Act (commonly called “Health Care Reform”) in March 2010 This law was modified by a reconciliation bill. The provisions of this combined legislation go into effect at various times, starting in 2009 forward through 2018. Here is a brief timeline of provisions which affect your business taxes, adapted from the Tax Foundation1.

      Retroactive provisions

      Small Business Tax Credit for certain small businesses (those meeting certain criteria) providing health insurance to employees (retroactive to January 1, 2010). In 2013, restricted only to insurance purchased through an exchange and only available for two consecutive years.

      Provisions going into effect before the end of 2010
      July 1, 2010: Impose 10% excise tax on indoor tanning services

      Provisions going into effect in 2011

      • Employers must report the value of health benefits on employee W-2 forms2.
      • Conform the definition of medical expenses for health savings accounts, Archer MSAs, health flexible spending arrangements, and health reimbursement arrangements to the definition of the itemized deduction for medical expenses (excluding over-the-counter medicines prescribed by a physician)
      • Increase in additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses to 20%

      Provisions going into effect in 2012

      • Simple cafeteria plan nondiscrimination safe harbor for certain small employers
      • Require information reporting on payments to corporations (on Form 1099-MISC3)

      Provisions going into effect in 2013

      • Limit health flexible spending arrangements in cafeteria plans to $2,500; indexed to CPI-U after 2013
      • Eliminate business tax deduction for expenses allocable to Medicare Part D subsidy
      • Impose Fee on Insured and Self-Insured Health Plans; Patient-Centered Outcomes Research Trust Fund (expires after 2019)

      Provisions going into effect in 2014

      • Increase by 15.75 percentage points the required corporate estimated tax payments factor for corporations with assets of at least $1 billion for payments due in July, August, and September 2014
      • Excise Tax (i.e., penalty) on Employers Not Providing Health Insurance Coverage to Employees (Shared Responsibility for Employers)
      • Requirement that employers report health insurance coverage
      • Provisions specifying cafeteria treatment of employers who purchase insurance through exchange

      Small Business Health Care Tax Credit: Frequently Asked Questions

      http://www.irs.gov/newsroom/article/0,,id=220839,00.html

      The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. The following questions and answers provide information on the credit as it applies for 2010-2013, including information on transition relief for 2010. An enhanced version of the credit will be effective beginning in 2014. The new law, the Patient Protection and Affordable Care Act, was passed by Congress and was signed by President Obama on March 23, 2010.

      Employers Eligible for the Credit

      1. Which employers are eligible for the small employer health care tax credit?

      A. Small employers that provide health care coverage to their employees and that meet certain requirements (“qualified employers”) generally are eligible for a federal income tax credit for health insurance premiums they pay for certain employees. In order to be a qualified employer, (1) the employer must have fewer than 25 full-time equivalent employees (“FTEs”) for the tax year, (2) the average annual wages of its employees for the year must be less than $50,000 per FTE, and (3) the employer must pay the premiums under a “qualifying arrangement” described in Q/A-3.  See Q/A-9 through 15 for further information on calculating FTEs and average annual wages and see Q/A-22 for information on anticipated transition relief for tax years beginning in 2010 with respect to the requirements for a qualifying arrangement.

      2. Can a tax-exempt organization be a qualified employer?

      A. Yes. The same definition of qualified employer applies to an organization described in Code section 501(c) that is exempt from tax under Code section 501(a). However, special rules apply in calculating the credit for a tax-exempt qualified employer. A governmental employer is not a qualified employer unless it is an organization described in Code section 501(c) that is exempt from tax under Code section 501(a). See Q/A-6.

      Calculation of the Credit

      3. What expenses are counted in calculating the credit?

      A.  Only premiums paid by the employer under an arrangement meeting certain requirements (a “qualifying arrangement”) are counted in calculating the credit. Under a qualifying arrangement, the employer pays premiums for each employee enrolled in health care coverage offered by the employer in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the coverage. See Q/A-22 for information on transition relief for tax years beginning in 2010 with respect to the requirements for a qualifying arrangement.

      If an employer pays only a portion of the premiums for the coverage provided to employees under the arrangement (with employees paying the rest), the amount of premiums counted in calculating the credit is only the portion paid by the employer.  For example, if an employer pays 80 percent of the premiums for employees’ coverage (with employees paying the other 20 percent), the 80 percent premium amount paid by the employer counts in calculating the credit. For purposes of the credit (including the 50-percent requirement), any premium paid pursuant to a salary reduction arrangement under a section 125 cafeteria plan is not treated as paid by the employer.

      In addition, the amount of an employer’s premium payments that counts for purposes of the credit is capped by the premium payments the employer would have made under the same arrangement if the average premium for the small group market in the state (or an area within the state) in which the employer offers coverage were substituted for the actual premium. If the employer pays only a portion of the premium for the coverage provided to employees (for example, under the terms of the plan the employer pays 80 percent of the premiums and the employees pay the other 20 percent), the premium amount that counts for purposes of the credit is the same portion (80 percent in the example) of the premiums that would have been paid for the coverage if the average premium for the small group market in the state were substituted for the actual premium.

      4.  What is the average premium for the small group market in a state (or an area within the state)?

      A. The average premium for the small group market in a state (or an area within the state) is determined by the Department of Health and Human Services (HHS). Revenue Ruling 2010-13 sets forth the average premium for the small group market in each state for the 2010 taxable year. For the 2010 taxable year, HHS may provide additional average premium rates for the small group market for areas within some states (sub-state rates). These additional sub-state rates will be published by the IRS and will not be lower than the applicable rate for each state that is set forth in RR-2010-13.

      5. What is the maximum credit for a qualified employer (other than a tax-exempt employer)?

      A. For tax years beginning in 2010 through 2013, the maximum credit is 35 percent of the employer’s premium expenses that count towards the credit, as described in Q/A-3.

      Example: For the 2010 tax year, a qualified employer has 9 FTEs with average annual wages of $23,000 per FTE. The employer pays $72,000 in health care premiums for those employees (which does not exceed the average premium for the small group market in the employer’s state) and otherwise meets the requirements for the credit.  The credit for 2010 equals $25,200 (35% x $72,000).

      6. What is the maximum credit for a tax-exempt qualified employer?

      A.  For tax years beginning in 2010 through 2013, the maximum credit for a tax-exempt qualified employer is 25 percent of the employer’s premium expenses that count towards the credit, as described in Q/A-3. However, the amount of the credit cannot exceed the total amount of income and Medicare (i.e., hospital insurance) tax the employer is required to withhold from employees’ wages for the year and the employer share of Medicare tax on employees’ wages.

      Example: For the 2010 tax year, a qualified tax-exempt employer has 10 FTEs with average annual wages of $21,000 per FTE. The employer pays $80,000 in health care premiums for those employees (which does not exceed the average premium for the small group market in the employer’s state) and otherwise meets the requirements for the credit. The total amount of the employer’s income tax and Medicare tax withholding plus the employer’s share of the Medicare tax equals $30,000 in 2010.

      The credit is calculated as follows:

      (1)  Initial amount of credit determined before any reduction: (25% x $80,000) = $20,000
      (2)  Employer’s withholding and Medicare taxes: $30,000
      (3)  Total 2010 tax credit is $20,000 (the lesser of $20,000 and $30,000).

      7. How is the credit reduced if the number of FTEs exceeds 10 or average annual wages exceed $25,000?

      A.  If the number of FTEs exceeds 10 or if average annual wages exceed $25,000, the amount of the credit is reduced as follows (but not below zero). If the number of FTEs exceeds 10, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the number of FTEs in excess of 10 and the denominator of which is 15. If average annual wages exceed $25,000, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the amount by which average annual wages exceed $25,000 and the denominator of which is $25,000. In both cases, the result of the calculation is subtracted from the otherwise applicable credit to determine the credit to which the employer is entitled. For an employer with both more than 10 FTEs and average annual wages exceeding $25,000, the reduction is the sum of the amount of the two reductions. This sum may reduce the credit to zero for some employers with fewer than 25 FTEs and average annual wages of less than $50,000.

      Example: For the 2010 tax year, a qualified employer has 12 FTEs and average annual wages of $30,000. The employer pays $96,000 in health care premiums for those employees (which does not exceed the average premium for the small group market in the employer’s state) and otherwise meets the requirements for the credit.

      The credit is calculated as follows:

      (1) Initial amount of credit determined before any reduction: (35% x $96,000) = $33,600
      (2)  Credit reduction for FTEs in excess of 10: ($33,600 x 2/15) = $4,480
      (3) Credit reduction for average annual wages in excess of $25,000: ($33,600 x $5,000/$25,000) = $6,720
      (4) Total credit reduction: ($4,480 + $6,720) = $11,200
      (5) Total 2010 tax credit: ($33,600 – $11,200) = $22,400.

      8. Can premiums paid by the employer in 2010, but before the new health reform legislation was enacted, be counted in calculating the credit?

      A. Yes. In computing the credit for a tax year beginning in 2010, employers may count all premiums described in Q/A-3 for that tax year.

      Determining FTEs and Average Annual Wages

      9.  How is the number of FTEs determined for purposes of the credit?

      A. The number of an employer’s FTEs is determined by dividing (1) the total hours for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee) by (2) 2,080. The result, if not a whole number, is then rounded to the next lowest whole number. See Q/A-12 through 14 for information on which employees are not counted for purposes of determining FTEs.

      Example: For the 2010 tax year, an employer pays 5 employees wages for 2,080 hours each, 3 employees wages for 1,040 hours each, and 1 employee wages for 2,300 hours.

      The employer’s FTEs would be calculated as follows:

      (1) Total hours not exceeding 2,080 per employee is the sum of:

      a. 10,400 hours for the 5 employees paid for 2,080 hours each (5 x 2,080)
      b. 3,120 hours for the 3 employees paid for 1,040 hours each (3 x 1,040)
      c. 2,080 hours for the 1 employee paid for 2,300 hours (lesser of 2,300 and 2,080)

      These add up to 15,600 hours

      (2) FTEs: 7 (15,600 divided by 2,080 = 7.5, rounded to the next lowest whole number)

      10. How is the amount of average annual wages determined?

      A. The amount of average annual wages is determined by first dividing (1) the total wages paid by the employer to employees during the employer’s tax year by (2) the number of the employer’s FTEs for the year. The result is then rounded down to the nearest $1,000 (if not otherwise a multiple of $1,000). For this purpose, wages means wages as defined for FICA purposes (without regard to the wage base limitation).  See Q/A-12 through 14 for information on which employees are not counted as employees for purposes of determining the amount of average annual wages.

      Example: For the 2010 tax year, an employer pays $224,000 in wages and has 10 FTEs.

      The employer’s average annual wages would be: $22,000 ($224,000 divided by 10 = $22,400, rounded down to the nearest $1,000)

      11. Can an employer with 25 or more employees qualify for the credit if some of its employees are part-time?

      A. Yes. Because the limitation on the number of employees is based on FTEs, an employer with 25 or more employees could qualify for the credit if some of its employees work part-time. For example, an employer with 46 half-time employees (meaning they are paid wages for 1,040 hours) has 23 FTEs and therefore may qualify for the credit.

      12. Are seasonal workers counted in determining the number of FTEs and the amount of average annual wages?

      A. Generally, no. Seasonal workers are disregarded in determining FTEs and average annual wages unless the seasonal worker works for the employer on more than 120 days during the tax year.

      13. If an owner of a business also provides services to it, does the owner count as an employee?

      A. Generally, no. A sole proprietor, a partner in a partnership, a shareholder owning more than two percent of an S corporation, and any owner of more than five percent of other businesses are not considered employees for purposes of the credit. Thus, the wages or hours of these business owners and partners are not counted in determining either the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit.

      14. Do family members of a business owner who work for the business count as employees?

      A. Generally, no. A family member of any of the business owners or partners listed in Q/A-13, or a member of such a business owner’s or partner’s household, is not considered an employee for purposes of the credit. Thus, neither their wages nor their hours are counted in determining the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit. For this purpose, a family member is defined as a child (or descendant of a child); a sibling or step-sibling; a parent (or ancestor of a parent); a step-parent; a niece or nephew; an aunt or uncle; or a son-in-law, daughter- in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law.

      15.  How is eligibility for the credit determined if the employer is a member of a controlled group or an affiliated service group?

      A. Members of a controlled group (e.g., businesses with the same owners) or an affiliated service group (e.g., related businesses of which one performs services for the other) are treated as a single employer for purposes of the credit. Thus, for example, all employees of the controlled group or affiliated service group, and all wages paid to employees by the controlled group or affiliated service group, are counted in determining whether any member of the controlled group or affiliated service group is a qualified employer. Rules for determining whether an employer is a member of a controlled group or an affiliated service group are provided under Code section 414(b), (c), (m), and (o).

      How to Claim the Credit

      16. How does an employer claim the credit?

      A. The credit is claimed on the employer’s annual income tax return. For a tax-exempt employer, the IRS will provide further information on how to claim the credit.

      17. Can an employer (other than a tax-exempt employer) claim the credit if it has no taxable income for the year?

      A. Generally, no. Except in the case of a tax-exempt employer, the credit for a year offsets only an employer’s actual income tax liability (or alternative minimum tax liability) for the year. However, as a general business credit, an unused credit amount can generally be carried back one year and carried forward 20 years. Because an unused credit amount cannot be carried back to a year before the effective date of the credit, though, an unused credit amount for 2010 can only be carried forward.

      18.  Can a tax-exempt employer claim the credit if it has no taxable income for the year?

      A. Yes. For a tax-exempt employer, the credit is a refundable credit, so that even if the employer has no taxable income, the employer may receive a refund (so long as it does not exceed the income tax withholding and Medicare tax liability, as discussed in Q/A-6).

      19. Can the credit be reflected in determining estimated tax payments for a year?

      A. Yes. The credit can be reflected in determining estimated tax payments for the year to which the credit applies in accordance with regular estimated tax rules.

      20. Does taking the credit affect an employer’s deduction for health insurance premiums?

      A. Yes. In determining the employer’s deduction for health insurance premiums, the amount of premiums that can be deducted is reduced by the amount of the credit.

      21. May an employer reduce employment tax payments (i.e., withheld income tax, social security tax, and Medicare tax) during the year in anticipation of the credit?

      A. No. The credit applies against income tax, not employment taxes.

      Anticipated Transition Relief for Tax Years Beginning in 2010

      22. Is it expected that any transition relief will be provided for tax years beginning in 2010 to make it easier for taxpayers to meet the requirements for a qualifying arrangement?

      A. Yes. The IRS and Treasury intend to issue guidance that will provide that, for tax years beginning in 2010, the following transition relief applies with respect to the requirements for a qualifying arrangement described in Q/A-3:

      (a) An employer that pays at least 50% of the premium for each employee enrolled in coverage offered to employees by the employer will not fail to maintain a qualifying arrangement merely because the employer does not pay a uniform percentage of the premium for each such employee. Accordingly, if the employer otherwise satisfies the requirements for the credit described above, it will qualify for the credit even though the percentage of the premium it pays is not uniform for all such employees.

      (b) The requirement that the employer pay at least 50% of the premium for an employee applies to the premium for single (employee-only) coverage for the employee. Therefore, if the employee is receiving single coverage, the employer satisfies the 50% requirement with respect to the employee if it pays at least 50% of the premium for that coverage. If the employee is receiving coverage that is more expensive than single coverage (such as family or self-plus-one coverage), the employer satisfies the 50% requirement with respect to the employee if the employer pays an amount of the premium for such coverage that is no less than 50% of the premium for single coverage for that employee (even if it is less than 50% of the premium for the coverage the employee is actually receiving).