Tax Updates
IRS Redesigns Form 941
The IRS recently released a revised Form 941, Employer's Quarterly Federal Tax Return. They are requiring employers to use Revised Form 941 to report payroll taxes, beginning with the second quarter. Using this form, employers can report new hires that qualify them for tax exemptions under the Hiring Incentives to Restore Employment (HIRE) Act, enacted earlier this year.
IRS Issues Guidance on Small Business Health Insurance Tax Credit
The IRS has issued new guidance to make it easier for small businesses to determine whether they are eligible for the new health insurance tax credit under the Affordable Care Act. Small businesses who provide health insurance for employees are eligible for credits of up to 35% of non-elective contributions they make on behalf of their employees for insurance premiums. To qualify as a small business, the employer must have fewer than 25 full-time equivalent employees (FTEs), and the average annual wages of its employees must be less than $50,000 per FTE.
Automatic Revocation of the Tax Exempt Status
Starting on Monday, May 15, the IRS began revoking tax-exempt status for those organizations who failed to file an information return in the Form 990 series for three consecutive years. Those organizations that have lost their exemption will need to reapply with the IRS. The organizations should also note that any income received between May 15 and reinstatement of their exemption may be taxable.
Tax on indoor tanning services
The Patient Protection Act imposes a 10% tax on amounts paid for indoor tanning services (new IRC 5000B). Like a sales tax, the tax will be collected from the person tanning when payment for the tanning services is made. The provision applies to services performed on or after July 1, 2010.
HIRE Act
This hiring incentive represents a less expensive alternative to President Obama's FY 2011 budget proposal of a $5,000 tax credit for every new employee hired by a small business in 2010, capped at $500,000 for any one employer. The president also proposed reimbursing small businesses on Social Security taxes paid on any wage increases for moderate income employees.