Health Insurance Credit

New for 2010: Tax Credit Helps Small Employers Provide Health Insurance Coverage

Many small businesses and tax-exempt organizations that provide health insurance coverage to their employees now qualify for a special tax credit, according to the Internal Revenue Service.

Included in the health care reform legislation, the Patient Protection and Affordable Care Act, approved by Congress and signed by President Obama on March 23, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

“This credit provides a real boost to eligible small businesses by helping them afford health coverage for their employees,” said IRS Commissioner Doug Shulman. “We urge small businesses and tax-exempt employers to look closely at this important tax break — which is already effective — to see if they qualify.”

The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.

The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low and moderate income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.

The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.

The IRS will use postcards to reach out to millions of small businesses that may qualify for the credit. The postcards will encourage small business owners to take advantage of the credit if they qualify.

HIRE ACT

On March 18, 2010, the President signed the Hiring Incentives to Restore Employment (HIRE) Act. This new jobs bill is intended to encourage employers to hire the unemployed. The HIRE Act creates two new incentives for hiring and retaining unemployed workers:

1. The employer gets a holiday from paying the business’s share of the OASDI (Social Security) tax on the new employee for the rest of 2010, and

2. The employer gets up to a $1,000 tax credit for keeping the new hire on the payroll for at least one year.

Some additional details about the incentives in the new hiring act include:

The 6.2% payroll tax holiday is immediate and increases your business cash flow. While the business is not required to pay its ½ of the OASDI on the new hire’s wages, it must still pay the Medicare tax on the wages paid to the new employees and all FICA taxes for old employees.

The relief from OASDI matching for the first quarter of 2010 is only available for qualified employee wages paid between March 19 and March 31, 2010. In addition, this relief provision
will only reduce payroll deposits beginning in April, 2010.

To encourage businesses to retain the new hires for at least 52 consecutive weeks, the HIRE Act also provides a credit up to the lesser of $1,000 or 6.2% of the first $16,129.03 of wages paid.
This credit will be claimed on the 2011 return.

There is no minimum weekly number of hours of work required of the new employee.

The maximum payroll tax credit that may be forgiven per employee is $6,622. The business saves 6.2% on both a $40,000 worker and a $90,000 worker. There is no maximum dollar amount of forgiveness per business; if you hire 5 qualified employees, your credit could be over $33,000!

If a worker is eligible for both the HIRE credit and the “Work Opportunity Tax Credit,” the business can choose one benefit or the other for 2010—no double dipping.

There are no HIRE tax breaks if the business hires family members (except spouses).

The business can’t simply replace another employee and qualify for the credit unless the replaced employee separated from employment voluntarily or for cause.

The new qualified employee must sign an affidavit stating “Under penalty of perjury, I certify I have not been employed for more than 40 hours in the 60-day period prior to beginning
employment on ______________, 2010."

I hope you find this information helpful. If you would like more details about these provisions, please call us at your convenience.

QuickBooks Seminars

Master the Fundamentals with our Mastering QuickBooks® Hands-On Training Course
Valuable Seminar on QuickBooks® Financial Software
What Every Business Owner Should Know
Double Entry Bookkeeping, LLC.
137 Iroquois Avenue
Essex Junction, VT 05452
Call 802-878-0990 to register
Cost: $175, including materials

QuickBooks ProAdvisor Certification Exam

Diana J. Jones, Double Entry Bookkeeping, LLC. has passed the QuickBooks 2010 ProAdvisor Certification Exam. This certification demonstrates expert knowledge of QuickBooks.

Diana has several years experience in setting up client QuickBooks files as well as helping her clients improve their accounting systems.

Double Entry Bookkeeping offers hands-on individual and classroom training. Double Entry Bookkeeping, LLC. also offers clients full-charge bookkeeping, payroll and tax preparation services.

First-Time Homebuyer Credit

A taxpayer who is a first-time homebuyer of a principal residence may claim a refundable credit equal to 10 percent of the purchase price of the residence (with a maximum credit of $8,000 ($4,000 for married couples filing separately)). The Worker, Homeownership and Business Assistance Act of 2009, signed into law on November 6, extends the credit for qualified taxpayers purchasing principal residences on or before April 30, 2010. If a taxpayer enters into a binding contract before May 1, 2010, to close on the purchase of a principal residence before July 1, 2010, the new law treats the credit as not expiring until July 1, 2010.
The new law also expands the credit to 'long-time homeowners' who are buying replacement property but at a reduced amount of the credit. Individuals who have owned and used the same residence as their principal residence for any five consecutive year period during the eight year period ending on the date of the purchase of a subsequent principal residence may be eligible for a reduced credit of $6,500 ($3,250 for married couples filing separately).
Congress has also made the credit available to more individuals by increasing the modified adjusted gross income (MAGI) phaseouts for the credit. For purchases made after November 6, 2009, the credit begins to phase out for individuals with MAGI between $125,000 and $145,000, and for married couples filing joint returns with MAGI between $225,000 and $245,000."

Diana J. Jones

Why Would A Business Hire Double Entry Bookkeeping?

1. Allows the business owner to concentrate on their career area of expertise -- doing the things they do best. Leave the books to someone with accounting/bookkeeping expertise.

2. It’s critical to have checks & balances within the office financial procedures. This enables errors to be found more quickly so that necessary corrections can be made; reduces the opportunity for fraudulent activity.

3. Accounts Payable -- bills to be paid are entered into their accounting program with their respective due dates and categorized to proper accounts. This is coupled with check preparation. We select the bills that will come due before our next visit and either print computer generated checks or hand write checks - for owners’ signatures. For many clients, we also prepare an ‘open payables report’ so owners can determine their future cash needs for upcoming expenses.

4. For some clients, we utilize the Accounts Receivable functions in our accounting software to set up their business’s clients so that they can be invoiced for services or sales provided to them. We can then post customer payments and track any amounts owed to the business. We can prepare customer statements and uses a variety of reports to assist with debt collection.

5. Organization and filing of supporting paper records (invoices, receipts, statements, contracts, etc.) it very important especially when there is a need to look back at the source documents -- for example during income tax preparation or during the course of an audit. This is a service that we provide to our clients.

6. It’s very important to properly categorize financial transactions in the accounting software so that accurate financial statements can be produced. Each business has a “Chart of Accounts” that lists all the appropriate accounts.

7. We perform bookkeeping services as frequently or infrequently as needed by the client. Keeping the books current allows for the production of timely financial statements -- critical for making sound financial decisions.

8. Bank Statement Reconciliations -- are a critical task performed by all accountants. Not only does this process identify potential errors made in the data entry into QB, but there can be errors on the bank end as well. Reconciling the bank statements on a regular basis makes identifies any errors so they can be corrected immediately. Generally, accounting duties should be split up within a business -- going back to that checks and balances concept. A bookkeeper is independent of the business and typically not a signer on the bank account. As such, is the perfect person to handle the bank reconciliation.

9. Credit Card Statement Reconciliations -- should be reconciled for the same reasons as regular bank statements - and particularly if personnel, in addition to the owner, have access to the company credit cards.

Taxes ~ this is a critical area for all businesses ~ and there are many types of taxes that need to be paid during the course of a year.

10. For business owners preferring to handle their payroll in-house; timely filing of payroll tax forms and payments can be a challenge unless you have the knowledge and expertise. Combined, our staff has more than 75 years of bookkeeping experience - including payroll.

11. We also handle the filing of other business taxes such as Meals & Rooms Taxes; Sales & Use Taxes, Property Taxes. We monitor their respective due dates to be sure these are paid on time, avoiding costly penalties. When needed, we communicate with the IRS, Vermont Department of Taxes and Vermont Department of Labor on behalf of our clients.

12. One of the primary goals of our services is to prepare our client for year end income tax filings. Double Entry Bookkeeping offers tax preparation services to businesses and individuals ~ a great service to smaller businesses as all their financial needs can be met by one company.


13. In addition to everyday bookkeeping activities, we also assist owners in areas of business development ~ these include:

· Budgeting -- we can assist with budget preparation and/or financial statements that compare the actual figures for a given period - to the budget

· Cash Flow Projections -- A useful tool for many businesses; we can assist with the set up of a cash flow analysis worksheet

· Financial Analysis -- Our accounting software contains numerous reports enabling us to analyze businesses in a variety of ways; in addition, most reports can easily be exported into Excel allowing for custom studies on anything the owner might need pertinent to their business

· Custom studies might include assistance with costing/pricing of a company’s product or services -- a very important tool to determine a company’s profitability.

14. QuickBooks Training - is a service we provide for the do-it-yourself business owners as they should be properly trained on the software and have adequate accounting background if they are handling their own finances. Diana Jones & I are certified QuickBooks Pro-advisors -- we not only have on the job experience, but we stay updated with the newest advancements in QuickBooks by taking the annual training programs.

15. Lastly, and most importantly, each time we complete a work session, whether in our office or at the clients’, we backup the client’s work -- either on their system or on a portable device. We recommend that our “on-site” clients use the “Remote Data Backup” program just as we do in our office.

Paulette Bergeron