Even though there are signs of improvement, the U.S. economy still remains sluggish. No doubt, this has been particularly tough for small business owners.
So to help things along, Congress has passed another stimulus bill: The Hiring Incentives to Restore Employment (HIRE) Act.
To get some insight on this, I had a chance to talk to Bob Meighan, who is a vice president at Intuit's (INTU) TurboTax.
Background: As an employer, you need to pay one-half of a worker's Social Security tax, which comes to 6.2%. But under HIRE, this payment will be exempted.
However, the worker must be unemployed for at least 60 days before the hiring. In other words, make sure you meet the verification requirements. These should be available soon, such as from ADP (ADP), Intuit or other payroll providers.
Some other things to consider include:
- The tax exemption is for employees hired between February 3, 2010, and January 1, 2011.
- If the worker stays for a year, then there will be an additional credit of $1,000.
- Relatives are not eligible.
- And of course, you cannot fire employees and rehire them so as to get the benefit.
Impact: OK, this sounds like a nice perk. But is it enough to encourage hiring?
Keep in mind that new hires are usually at lower pay. Thus, if you pay someone $25,000 per year, then your savings will be $1,550.
True, this is a nice benefit, but it's probably not enough to result in significant hiring.
Another Goodie: There is another provision that may be much more beneficial to business owners. That is, Congress is going to extend the Section 179 deduction for equipment expenses. The amount will remain at $250,000.
Basically, this means that if you buy equipment, you can get a deduction for the first year instead of using depreciation (which means taking expenses over three or more years). No doubt, this can be a big benefit as business owners try to boost their cash flows.
For more information on the Section 179 deduction, you can check out one of my recent columns: Some Last-Minute Tax Strategies.