Business Tax Updates

WA B&O Tax Rate Increase

The B&O Tax Rate for Services has increased from 1.5% to 1.8%, effective May 1, 2010.  Retail and other classifications are not affected.

HIRE Act – Incentives for hiring

There are two new tax benefits for hiring new “qualified” employees.

A “qualified” employee is:
– Hired between February 3, 2010 and January 1, 2011
– Not employed in the 60 days prior to their hire date
– Not hired to replace another employee (unless that employee had quit or been fired for cause)
– Not related to you

If you have (or intend to) hire a qualified employee, have them complete Form W-11 to certify they had been unemployed.

These employees qualify you for an exemption from the 6.2% employer social security tax on their wages through the end of 2010.

If a qualified employee are retained for at least 52 weeks, you will also be eligible for a credit up to $1,000 on your annual federal tax return.

Health Care Reform

While the Health Care Reform bills are big and involved, I’m just going to highlight a couple of points.

First, employers are not required to provide health insurance coverage.  After 2013, employers with 50 or more full-time employees will be penalized if they do not provide coverage.

In 2010 through 2013, small employers (less than 25 employees with average annual wages under $50,000) will be eligible for a tax credit for up to 35% of the health insurance premiums paid.  (Note, premiums paid from employees’ salary do not count.)

Last, in 2013, individuals earning over $200,000 per year and married filing jointly couples earning over $250,000 per year will start paying an additional .9% Medicare tax and a 3.8% tax on ‘unearned’ income (interest, dividends, rents, royalties, etc.).  While these are not taxes paid by businesses, business owners may need to take these new taxes into consideration when planning.

I hope this information has been helpful.  Please remember these are brief summaries of complex tax laws and should not be relied upon as tax advice.