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January 07, 2011
New Federal Tax Package Highlights for Employers

On December 17, 2010, the House of Representatives voted to pass an $858 billion tax package that was signed into law later that day by President Barack Obama. The legislation, Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (HR 4853), was followed closely by the Society of Human Resource Management (SHRM) because it includes provisions that are important to employers. Some of the provisions as described by SHRM include:

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Section 127, Employer-Provided Education Assistance—Allows employees to use up to $5,250 in employer-provided tuition assistance—tax-free—for graduate, undergraduate, or certificate-level education and training.

Deductible Education Expenses—Allows assistance from certain scholarship programs to be excluded from income. Qualified tuition reductions for certain education provided to employees are also excludable from income.

Federal Unemployment Benefits—Extends benefits for an additional 13 months, through December 2011, and maintains the current cap of 99 weeks of total benefits.

Employer-Provided Child Care Credit—Allows a credit of 25 percent for childcare expenses and 10 percent for childcare resources (not totaling more than $150,000) for acquiring, constructing, rehabilitating or expanding property, which is used for a childcare facility.

“Make Work Pay” Credit—Terminates the credit and replaces it [instead] with a 1-year payroll tax reduction that will reduce the employee share of the FICA payroll tax by almost one-third, by 2 percentage points—down to 4.2 percent. A PDF from the Internal Revenue Service explains this in more detail.

Expansion of Employer-Provided Mass Transit and Parking Benefits—Allows employers to reimburse employees for transit-related fringe benefits up to $230 a month.

Work Opportunity Tax Credit (WOTC)—Allows employers to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to new hires of one of nine targeted groups. These groups include members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program, qualified veterans, designated community residents and others.

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