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Major Programs for Business Owners

Added September 2010

There are three major programs for business owners that have employees in 2010. They are the Small Business Health Care Tax Credit, the New Hire Payroll Tax Exemption and the Business Credit for Retention of New hired Individuals. Here is a basic overview of each program:


Small Business Health Care Tax Credit:


This credit is for small businesses, less the 25 full time employees, that provide health care coverage for their employees. The employer must provide at least 50% of the cost of health care coverage and the average annual wage must be below $50,000. The credit is up to 35% of premium cost paid in 2010. The amount of credit is phased out for firms with average wages between $25,000 and $50,000 and with the equivalent of between 10 and 25 full time workers. The calculation of the average wage and number of workers can be involved, so you need to make sure you qualify for the credit.  The credit will be claimed on the employer’s 2010 income tax return.


Payroll Tax Exemption for new hires:


This is an exemption from the employer’s 6.2% share of Social Security Tax on wages paid to qualified employees from March 19, 2010 through December 31, 2010. A qualified employee is an individual who begins employment after Feb 3, 2010 and before January 1, 2011, who had been unemployed or employed for 40 hours or less during the 60 day period before you employed them. The new hire cannot replace another employee, unless that employee voluntarily separated from service or was terminated for cause. The new employee must sign an affidavit stating that they are qualified. The exemption is claimed on the employer’s Form 941. If you have questions on the exemption please contact our office


Retention credit:


A business that hires a new employee that qualifies for the Payroll Tax Exemption may claim a retention credit if the qualified individual remains an employee for 52 consecutive weeks. The employees pay cannot decrease significantly in the second half of the year. This credit will be claimed on the employer’s 2011 tax return.

  1. If the individual is age 60 or older they may apply for benefits under the deceased spouse.


Disability benefits are difficult to get. The definition of Social Security disability is very stringent. Once qualified the individuals receives the following benefits:

  1. Payments are computed as though the individual had reached full retirement.

  1. Payments are made for any dependents under age 18, subject to the family maximum of twice the individual retirement benefit.


Married couples have the following options:

  1. If both spouses worked they may collect benefits under their own accounts as each qualifies for benefits. Example: Mary is 62 and John is 64. The John is earning too much money to apply for benefits, but Mary is not. The Mary may collect benefits under her own account and continue or stop working. When John begins collecting benefits, Mary may switch to receiving benefits under John’s account. Example: Mary begins receiving $400/mo of benefits under her account at age 62. When John is 66 he begins drawing benefits of $1,500/mo. Mary is now 64. If she switches to John’s account her benefits will be $675/mo. She switches to John’s account.

  1. If one spouse worked and the other did not, or does not have 40 quarters of earnings, then the non-working spouse will collect benefits from the account of the retired spouse. The non-working spouse must be at least 62 and the spouse that worked must be collecting benefits. Generally the non-working spouse will receive 50% of the amount paid to the retired spouse. Example: Mary never worked outside of the home. John begins collecting benefits at age 65. At that time Mary is 62. Mary will receive a benefit that is about 40% of the amount collected by John.

  1. A widow or widower collecting benefits from the account of a retired spouse, will lose his/her benefit when the retired spouse dies but will begin receiving the amount that the retired spouse was receiving. Example John receives $1,000/mo and Mary $400/month. When John dies, May will receive $1,000/month.

Divorced Individuals that were married at least 10 years before they divorced have the following options:

  1. A person that is 62 or older has a divorced spouse that is receiving benefits. That person may begin to receive benefits as though he/she were still married as described above.

  1. If the former spouse dies, then the remaining divorced spouse will receive the benefit that the divorced spouse was receiving.

  1. Like married individuals above, couples that were married at least 10 years before they divorced will get the same benefits of currently married couples.

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