AUGUST 2010

New Employment Tax Credits For Exempt Organizations

Lior Temkin, CPA - Senior Manager, Tax

Two new tax benefits are now available to Non-Profit Organizations (“NPO”) hiring employees who are
only working part-time or were previously unemployed. These provisions are part of the Hiring Incentives
to Restore Employment (HIRE) Act enacted into law in March 2010.

Per the HIRE Act, employers who hire unemployed workers after February3, 2010, and before January
1, 2011, may qualify for a 6.2 percent payroll tax incentive, in effect exempting them from their share of
Social Security taxes on wages paid to these employees after March 18, 2010. This reduced tax withhold-
ing will have no effect on the employee’s future Social Security benefits. Employers would still need to
withhold the employee’s 6.2 percent share of Social Security taxes, income taxes, and the employer’s and
employee’s share of Medicare taxes on these wages.

For each employee retained for at least one year, NPOs may claim an additional general business tax cred-
it up to $1,000 per worker when filing their 2011 income tax returns. New hires filling existing positions
also qualify but only if the employees they are replacing left voluntarily or for cause.

In addition, the new law requires that the employer get a statement from each eligible new hire certifying
that he or she was worked less than a total of 40 hours for someone else during the 60-day period or, al-
ternatively, was unemployed during the 60 days before beginning work. Currently, the IRS is developing a
form that employees can use to make the required statement. Employers may claim the payroll tax ben-
efit on the federal employment tax return they file on a quarterly basis with the IRS. Eligible employers
will be able to claim the new tax incentive on their revised employment tax form for the second quarter
of 201O. For additional information regarding the revised forms on these two new tax provisions, please
visit www.irs.gov

For more information, or if we can be of assistance to you, please do not hesitate contact one of
SingerLewak’s Nonprofit Partners:

Stephen P. Carter - Silicon Valley Lewis Sharpstone - Los Angeles

SCarter@singerlewak.com LSharpstone@singerlewak.com

Jeff Holt - Los Angeles Rob Schlener - Orange County

JHolt@singerlewak.com RSchlener@singerlewak.com