Employment Law E-Newsletter—Volume 9
COBRA Subsidy Extended - Important Deadline Approaching
Your organization may be eligible for tax credits and/or tax refunds. Please contact the Employment Law Group, www.flblaw.com, for more information.
Jobs Tax Credit
Under the Hiring Incentives to Restore Employment ("HIRE") Act, enacted March 18, 2010, two new tax benefits are available to employers who hire certain previously unemployed workers ("qualified employees").
The first, referred to as the payroll tax exemption, provides employers with an exemption from the employer's 6.2 percent share of social security tax on wages paid to qualifying employees, effective for wages paid from March 19, 2010 through December 31, 2010.
In addition, for each qualified employee retained for at least 52 consecutive weeks, businesses will also be eligible for a general business tax credit, referred to as the new hire retention credit, of 6.2 percent of wages paid to the qualified employee over the 52 week period, up to a maximum credit of $1,000.
Additional information, as well as the required Employee Affidavit and Employer Credit Claim forms can be found at: http://www.irs.gov/businesses/small/article/0,,id=220745,00.html
Possible Refund of Payroll Taxes
A Federal Court recently ruled that employers who laid off workers may be eligible for a refund from the IRS. In United States v. Quality Stores, Inc., 2010 WL 679136 (W.D. Mich. Feb. 23, 2010), the Court held that severance payments do not constitute "wages" for payroll tax purposes, and are not subject to payroll taxes. The company litigating the matter was granted a $1 million refund after financial difficulties forced it to lay off nearly all of its workers and pay severance packages. Payroll taxes were paid on the severance packages.
To take advantage of this opportunity, an employer must request a refund from the IRS within three years.
A word of caution: the IRS is set to appeal the decision and there is a strong possibility that it may be overturned, thus disallowing any refund claims. Because of the appeal, it is unlikely that the IRS will actually pay any refunds until a final decision is rendered. However, filing a claim now is the only way to protect your right to a refund if the decision is sustained.
To find out more information on how to file a protective refund claim, please contact the Employment Law Group at Fitzpatrick Lentz & Bubba, P.C.
Health Care Premium Subsidies
The new health care legislation included a tax credit aimed at encouraging small business (both non-profit and for-profit) to provide (or maintain currently provided) health insurance for their employees. The credit will be available to employers having less than 25 full time equivalent ("FTE") employees, with equivalency based on forty (40) hours per week. The basic eligibility rules are:
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Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of single person (employee only) health care coverage for some of its workers.
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Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
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Average annual wage. A qualifying employer must pay average annual wages below $50,000 (excluding wages paid to owners or family members).
For qualifying businesses, the program will provide a credit of up to 35 percent of the business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
COBRA and UC Extended Again
Congress has once again extended the eligibility period for the COBRA subsidy. (This subsidy pays 65% of the COBRA premium, for up to fifteen (15) months, for persons who involuntarily lost their jobs during the eligibility period.) The eligibility period now extends through May 31, 2010.
At the same time, Congress also passed a 60 day extension of federal extended unemployment benefits ("Emergency Unemployment Compensation (EUC) benefits"). This extension is retroactive to April 5; however it does not provide additional weeks of coverage for those who have run out of all state and federal benefits.
The Extended Benefits (EB) program provides an additional 13 to 20 weeks of benefits to workers receiving unemployment insurance in states that have a specific unemployment rate. Eligibility depends on a person's tier of benefits plus the state guidelines.
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