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American Jobs Bill, Proposed September 2011
By Derek Morgan
The American Jobs bill would have several impacts on businesses if passed. These benefits range from savings initiatives such as social security match reductions for both employees and employers, credits for increased payroll, credits for hiring workers who were unemployed, extension of 100% bonus depreciation, and several revenue raisers which hurt small business owners. These benefits are explained in brief in this article, but should not be a substitute to contact your tax professional advisor on the potential impacts to you personally.
In an effort to relieve tax burdens on America’s small businesses, several benefits will be extended under this bill. The first of these is a payroll tax reduction that expands on the existing rules. For 2012, it will further reduce the Social Security portion of withholdings from the current 4.2% for employees to 3.1%. Additionally, this act would reduce the Employer portion of Social Security taxes paid to 3.1% from the current 6.2% rate. This would apply to all employers with limited exceptions which include household workers, government employers, and is limited to $5 million of ages that are employer paid. The second addition under this bill would be a new tax credit for employers which increase their payroll from the last quarter of 2011 throughout 2012. The tax credit under this proposal would fully eliminate the employer social security tax that would otherwise apply to increases in wages from the corresponding period for the prior year. The credit would be available on up to $50 million of an employer’s increased wages with the same exceptions as previously stated for the reduced employer Social Security measure. Next, another extension for bonus depreciation is proposed which would extend the 100% bonus depreciation deduction scheduled to expire in 2011 for one additional year through December of 2012. Finally, a series of tax credits will be established on the hiring of veteran and unemployed workers as discussed below.
Tax Credits for Unemployed and Veteran Workers:
In an effort to increase employment, the tax act also has several benefits. There will be a new credit for hiring workers who have been unemployed for at least 6 months for as much as a $4,000 credit. Additionally, a new series of credits will be placed in effect for the benefit of Veteran workers. Veterans with a service created disability who have been unemployed for at least 6 months will be eligible for a maximum credit of $9,600, rather than the $4,800 allowable now. Additionally, two new credits will be added for Veterans. Businesses who hire veterans unemployed for at least 4 weeks will be eligible for a credit of $2,400, while veteran hires that were unemployed for at least 6 months will now be eligible for a credit of $5,600.Tax Bill Revenue Raisers:
From a revenue raising stand-point, the largest impact on small business owners will be the elimination or reduction in tax deductions for individuals who earn more than $200,000 ($200,000 for single individuals, $250,000 for families). These individuals who see a significant raise in their tax due to a 28% reduction in Itemized and other deductions proposed on the bill. Other revenue raisers in the bill typically do not affect most small businesses but heavily hit the financial advisors, oil and gas industries, and companies who use corporate jets fleets.
Unfortunately, it is impossible to give comprehensive tax and accounting advice over the internet, no matter how well researched or written. Before relying on any information provided here, contact a tax or accounting professional to discuss your particular situation.