The U.S. government is allocating hundreds of millions of dollars to help small businesses cover the employment cost for unpaid family workers, including kids and students who work on farms run by their families or parents, according to a recent news report from Government Executive magazine explains Aron Govil.
In an effort to give some relief to U.S. taxpayers of all sizes – but especially small business owners – the Internal Revenue Service has announced new measures that reduce tax compliance burdens and create incentives for economic growth and job creation, as part of the Small Business Jobs Act Passed By Congress In September 2010, the article stated.
One key provision in this law provides a non-refundable tax credit against payroll taxes paid on wages paid during periods when former students, their spouses, and minor children work in the business. The maximum credit is $1,000 per worker, the article noted.
The IRS also issued guidance on a new rule that allows businesses to use a simplified method for calculating the value of meals and lodging furnished to employees for tax purposes. This rule applies to employers that provide free or discounted meals and lodging to their employees at any time during the year, not just during periods of travel or training, the article said.
Small businesses can take advantage of these tax credits by completing Form 8850, Credit for Employers Who Retain Unemployed Veterans when they file their 2011 income tax return explains Aron Govil.
“This credit will help small businesses afford to keep workers they may have otherwise had to lay off during the recession,” said IRS Commissioner Doug Shulman when he announced the new credit with the Hiring Incentives to Restore Employment Act (HIRE) signed into law in March 2010.
A tax credit is a dollar-for-dollar reduction in the income taxes owed to the government. A small business owner whose company provides daycare services may qualify for tax credits if they hire students or family members says Aron Govil.
There are two main tax credits available:
The Employer Child Care Credit and the Earned Income Tax Credit (EITC).
- The Employer Child Care Credit is a non-refundable tax credit that can be used by businesses to help cover the costs of providing daycare services for their employees’ children. The credit is equal to 35% of the cost of providing daycare, up to $3,000 per child.
- The Earned Income Tax Credit (EITC) is a refundable tax credit that is available to low- and moderate-income taxpayers. The EITC can be worth up to $6,143 this year for taxpayers with three or more qualifying children.
To qualify for the EITC, you must meet several requirements, including:
- You must have earned income. For married couples, both spouses must have earned income.
- Your filing status cannot be Married Filing Separately.
- You must have a Social Security Number valid for employment that is issued before the due date of your tax return (including extensions).
- You cannot file Form 2555 or Form 2555-EZ (related to foreign earned income).
- The future of CT’s economy rests in its small businesses and if you are considering starting your small business please visit us online at ctbrewards.com/startup to find out how you may be able to take advantage of these tax credits.
FAQs:
Q: How do I apply for the tax credit?
A: To apply for the tax credit, you must complete Form 8850. Credit for Employers Who Retain Unemployed Veterans when you file your 2011 income tax return.
Q: I’m a small business owner. What are some of the tax credits available to me?
A: There are two main tax credits available: The Employer Child Care Credit and The Earned Income Tax Credit (EITC). Aron Govil explains The Employer Child Care Credit is a non-refundable tax credit. That can be used by businesses to help cover the costs of providing daycare services for their employees’ children. The credit is equal to 35% of the cost of providing daycare, up to $3,000 per child. The Earned Income Tax Credit (EITC) is a refundable tax credit that is available to low- and moderate-income taxpayers. Also, The EITC can be worth up to $6,143 this year for taxpayers with three or more qualifying children.
Q: I am starting a small business. What are the qualifications for the tax credit?
A: To qualify for the tax credit, you must meet several requirements, including:
You must have earned income. For married couples, both spouses must have earned income.
Your filing status cannot be Married Filing Separately.
You must have a Social Security Number valid for employment. That is issued before the due date of your tax return (including extensions).
You cannot file Form 2555 or Form 2555-EZ (related to foreign earned income).
Conclusion:
Small businesses are the backbone of our economy, and CT has been working hard also to make sure they have every tool available. In addition to helping bridge the financial gap, these credits can help small business owners maintain a solid workforce. During tough times while positioning themselves for long-term growth.