Florida surety assoc presentation 5-11-2010

Apr 13, 2023

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Tax Legislation UpdateHIRE Act

Florida Surety Association

May 11, 2010

Jill Kling, ManagerLarsonAllen Construction and Real Estate Group

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HIRE Act

• Hiring Incentives to Restore Employment Act of 2010

• Signed into law on March 18, 2010

• Objective: To help stimulate the hiring of workers by the private sector

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Major Provisions of the Act

• Payroll Tax Holiday for hiring Unemployed Workers

• Tax Credit for Retaining Workers

• One-year extension of the small business expensing under Section 179

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Payroll Tax Holiday

• FICA imposes two taxes– OASDI (Old Age Survivors Disability Tax)

◊ 6.2% Tax Rate on wages up to $106,800

– HI (Medicare Hospital Insurance)◊ 1.45% Tax Rate on all wages

• Payroll Tax Holiday– Provides relief for the employer share of OASDI taxes– Wages paid from March 19, 2010 through December

31, 2010 to qualified individuals– Maximum tax forgiven = $6,621 per employee

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Eligibility for Payroll Tax Holiday

• Qualified Employer

– Any employer other than the federal or state government

– Includes non-profit organizations

– Note: Does not effect the self employment tax paid by self employed individuals

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Eligibility for Payroll Tax Holiday

• Qualified individual is anyone who:– Begins employment after Feb 3, 2010 and before Jan

1, 2011– Certifies by signed affidavit that they have not been

employed for more than 40 hours during the 60-day period ending on the date the individual begins employment

– Does not replace another employee unless:◊ Employee left voluntarily◊ Employee left for cause

– Can not be related to the employer

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Tax Credit for Retaining Workers

• Up to $1,000 Tax Credit for retaining qualified workers

• Qualified workers include:– An employee of the taxpayer who has worked 52

consecutive weeks; AND

– Whose wages for the last 26 weeks of employment equaled at least 80% of the wages for the first 26 weeks

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Tax Credit Example

ABC Corp hires Earl on February 15, 2010. The 52-week work requirement is satisfied in the 2011 year if Earl works for ABC until February 14, 2011. Earl’s wages for the 52-week consecutive period are $30,000. ABC will be able to claim a $1,000 credit for Earl on their 2011 tax return.

• Note: the credit is the maximum of $1,000 or 6.2% of the wages paid during the 52-week period

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Small Business Expensing Extended

• Increased Section 179 election available through 2011

• Up to $250,000 in qualified purchases may be expensed– Amount was $134,000 before HIRE legislation

enacted

• Ability to expense assets are reduced once purchases exceed $800,000

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Accounting Standards UpdateFlorida Surety Association

May 11, 2010

John Reed, PrincipalLarsonAllen Construction and Real Estate Group

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Financial Statement Changes

• New Standards in Effect for 2009 Year End Financial Statements

• New Standards in Effect for 2010 Financial Statements

• Potential Upcoming Changes

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New Standards in Effect for 2009 Year End Financial Statements

• FASB Codification Structure Replaces GAAP Hierarchy July 1, 2009 (Topics, Subtopics, Sections, Paragraphs)

• Codification Topic 740 (FIN 48) Income Tax Uncertainties

• Codification Topic 855 Subsequent Events– Type 1 Recognized Subsequent Events – Type 2 Nonrecognized Subsequent Events– Disclosure of consideration of when statements were

issued or were available to be issued

• Codification Topic 820-10 (SFAS 157) Fair Value Measurements – Updated Disclosures

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Sample Income Tax Uncertainties Adoption Sample Note

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Subsequent Event Consideration Sample Note

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Fair Value Measurements Example

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New Standards in Effect for 2010 Year End Financial Statements

• Codification Topic Consolidation of Variable Interest Entities (VIEs) (FAS 166/FIN 46(R))– Standards now based on control of entity. Fewer

VIEs need to be consolidated compared to prior standards

• Statements on Standards for Accounting and Review Services (SSARS) Number 19– Accountant can now explain why they aren’t

independent in a compilation engagement– Reviews can not be performed if not independent

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Potential New Accounting Pronouncements to Watch For

• New Lease Accounting Rules – Operating lease assets and liabilities would be booked and treated the same as capital leases

• Ongoing movement to converge Generally Accepted Accounting Principles (GAAP) with International Financial Reporting Standards (IFRS)– Effect on revenue recognition of long-term contracts

• Big GAAP / Little GAAP