Trucking company executives should be aware of certain provisions of the HIRE Act, Congress passed recently.
For 2010, the purchase of trucks, trailers, and other equipment may be written off or expensed on your income statement on the first $250,000 of purchases , subject to a spending cap of $800,000 allowed for the year, amounts purchased over the $800,000 cap will begin to phase out the $250,000 amount on a dollar for dollar basis.
If you hire new employees, you may want to look at the HIRE provisions, which may allow you to skip the 6.2 % required employer‘s share of the payroll tax payment, for the remainder of 2010. You will need to consult with your CFO or outside CPA to discuss what a qualifying employee is. In reading the HIRE provisions, the most interesting section is the eligibility requirement which states that a new employee will not be eligible if the new employee replaces another employee who performed the same job, for the employer, unless the prior employee left the job voluntarily or for cause. The new employee must have been unemployed for the last 60 days, except for 40 hours of employment, which is allowed during the out of work period. The following is a "what if" scenario you may kick around, to determine if your company qualifies for the payroll tax holiday, and the special $1,000 tax credit.
Consider the following: If your trucking company hires a driver, after February 3, 2010, who has been unemployed for 60 days, is hired by your company to drive truck # 109, previously driven by a company driver who left your company on their own accord, to seek other employment, it would appear on the surface that the company could take the payroll tax credit of 6.2 %.
If the new driver earned wages of $45,000, for the 2010 year, then the payroll tax credit computed at 6.2% would be $2790. The credit would apply to the 2nd, 3rd, and 4th quarter, 2010 payroll reporting periods.
In addition, if the new driver, stays a year, on the 2011 corporate tax return filed by the employer, an additional credit of $1,000 would be allowable to offset income taxes incurred by the company, the credit is the lesser of $1,000 or 6.2% of wages, thus the wage limit would be $16,000 in wages paid to reach the cap of $1,000.
This sounds too good to be true, given the nature of turnover in the trucking industry. If you had 100 percent turnover, which is an industry average, you would not be paying much of the payroll tax matching tax of 6.2% on wages paid new drivers hired during the year. More research need s to be done to determine what is meant by job replacement for the former employee who left the job voluntarily or for cause.
If you have any questions please give Richard Bell a call 501.753.9700.
