• HIRE Act Allows Payroll Tax Holiday and Tax Credit for Certain Employers and Adds Reporting Obligation for Certain Foreign Financial Assets
  • April 13, 2010
  • Law Firm: Loeb & Loeb LLP - Los Angeles Office
  • The “Hiring Incentives to Restore Employment Act,” H.R. 2847, signed by the President on March 18, contains some important tax-related provisions:

    Payroll Taxes. Employers who hire workers who have been unemployed for at least 60 days do not have to pay the employer’s Social Security payroll tax (6.2% on the first $106,800 of wages) for the balance of 2010. This tax holiday does not apply to the hiring of family members and you cannot fire a current worker and replace that worker with a previously unemployed worker. If the worker is still employed after fifty-two weeks, the employer will receive a non-refundable tax credit of up to $1,000. The new worker must have been hired after February 3, 2010, and the payroll tax holiday only applies to wages paid after March 18, 2010. The employer must choose between these benefits and the Work Opportunity Tax Credit if it would have been available.

    This legislation also extends through 2010 the ability of a business to expense new equipment investments of up to $250,000. The ability to expense the purchase of new equipment begins to phase out if the business buys more than $800,000 of eligible new equipment.

    Foreign Financial Assets. For taxable years beginning after the date of enactment (March 18, 2010), this act also imposes information reporting requirements on any U.S. individual who holds interests valued in the aggregate at more than $50,000 in (1) any depository or custodial account maintained by a non-U.S. financial institution, (2) any stock or security issued by a non-U.S. person, (3) any interest in a foreign entity, and (4) any financial instrument or contract with a non-U.S. counterparty not held within a custodial account maintained by a financial institution. The U.S. individual is required to provide, with the individual’s income tax return, certain information with respect to such specified foreign financial assets. Failure to report such assets as required, absent reasonable cause, will be subject to a penalty of $10,000, and additional penalties (up to $50,000) could apply if the failure continues after being notified by the IRS. The reporting requirements currently apply only to individuals, but the Act gives the IRS the authority to extend the reporting to U.S. entities.

    This new reporting is required in addition to the FBAR reporting that is discussed in a subsequent article. The information requested under this new provision is similar to that required on an FBAR, and certain assets may be reported on both reports; however, the information required is not identical. We anticipate that the IRS will provide guidance, and/or Treasury will provide regulations, before the due date of individual returns for the 2011 taxable year.