b'Mr.IvanA.Mangold TheTurnerRoofing&Supplyco.,Inc. P.O.Box17466 SanAntonio,Texas78217 TAXCREDITFORHIRINGNEWEMPLOYEES The1977TaxActestablishedanewtaxcreditavailabletoemployers whoaddnewemployeestotheirpayrollsduringcalendar1977and1978. Theamountofthecreditis equaltoone-halfoftheexcessofthecurrent year\'sunemploymentinsurancewages(FUTAwages)over102%oftheprevious year\'sFUTAwages."FUTAwages"meansthefirst$4,200ofwagespaidan employee. Let\'~seehowit works.In1976BigSubcontractor,Inc.(BS )has25 employeesandatotalpayrollof$250,000.AssumeFUTAwagesare$100,000. In1977BSadds10employeesincreasingitstotalpayrollto$350,000and its FUTAwagesto$142,000.Theamountbywhich1977FUTAwagesexceeds 102%of1976FUTAwagesis$40,000($142,000- $102,000).Halfofthat amount,or$20,000,isadirectcreditagainst1977taxes. Therearefourlimitations: l.Thetaxcreditmaynotexceed$100,000.The creditwillhelpsmallbusinessesbutprovidenobonanza toGeneralMotors. 2.Thecredit maynotexceed25%ofthisyear\'s FUTAwages.Inourexample,25%x$142,000is$35,500, sothislimitationdoesn\'tapply. 3.Thecredit maynotexceedtheamountoftaxdue fortheyeartowhichit applies,butanyexcesscredit maybecarriedbackthreeyearsandforwardsevenyears. 4.Thetaxcreditmaynotexceed50%oftheamount bywhichthisyear\'stotalwagesexceed105%oflast year\'stotalwages.Inourexample,50%of$87,500 ($350,000- $262,500)is$43,750,sothislimitation doesn\'tapply. NoneofthelimitationsappliestoBS.It getsa$20,000taxcredit. Thereisonecatch.Theamountofwagesdeductedonits returnmustbe reducedbythe$20,000credit.Assuminga50%taxbracket,thenettax benefittoBSis$10,000,not$20,000.Byadding$100,000toits payroll, BSsaved$10,000intaxes. Butit couldhavebeenmore.SupposeBShadadded20personsat $5,000ratherthan10at$10,000.Totalwagesarethesame.[Wewill disregardproductivity,aluxuryyouarenotafforded.]Butnowthe creditis$41,000($184,000- $102,000x50%)insteadof$20,000andthe nettaxbenefitis$20,500insteadof$10,000.Andnoneofthefour limitationsapplies.'