H.I.R.E. Goes Into Effect—How Does This Affect Your Business??
August 12th, 2010Hiring Incentives to Restore Employment (HIRE) Act
Enacted into law on March 18, 2010 and effective as of March 19, 2010 this new law is a two part tax benefit to employers who hire unemployed workers this year after February 3, 2010 and before January 1, 2011. The new law gives opportunity for employers to qualify for a 6.2-percent payroll tax incentive by exempting them from their share of Social Security taxes on wages paid to these qualifying workers.
Not all previously unemployed new hires will qualify. New employees filling existing positions will not be suitable for this tax credit unless the worker(s) they are replacing left voluntarily or for cause. Family members and other relatives do not qualify for this tax credit, nor do persons with more than 50% ownership in the business. Household employers cannot claim this new tax benefit. Eligible candidates must also have been unemployed for the last 60 consecutive days or worked less than a total of 40 hours in those 60 days.
Employers must receive a signed affidavit from each eligible new hire certifying that they were unemployed during the 60 days before beginning work or that they worked fewer than a total of 40 hours for someone else during the 60-day period. Employee Affidavit Form W-11 Additionally, the employer is not restricted to a minimum number of hours that they have to provide the employee, as the employer benefit is directly related to only 6.2 percent of any salary paid.
Employers taking the credit will claim the payroll tax benefit on the federal employment tax return (941) they file with the IRS beginning with the second quarter of 2010. Again, the credit applies to check dates of 3/19/10 through 12/31/10. Any amounts claimed for first quarter will be applied to the 2nd Quarter 2010 liabilities (941).
The additional employer advantage of the H.I.R.E. Act is that for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns. The tax credit is equal to the lesser of $1000 or 6.2 percent of federal wages paid to a RETAINED, QUALIFED employee. Please speak to your tax preparer for full details on what employees constitute as eligible for this tax incentive, as these are different from the qualifiers listed above.
The reduction in tax withholding will have no effect on the employee’s future Social Security benefits. Employers will still need to withhold the employee’s share of Social Security taxes, as well as income taxes. This law has no affect on the employer and employee’s shares of Medicare taxes.
As always, American Automated Payroll is here to assist you. Our payroll systems have been updated to support the changes for H.I.R.E. Act and our staff has been trained and prepared on implementation procedures.
AAP will continue to post updates, new information and forms for clients as it becomes available. As well, please feel free to forward any particular questions to our Support Department at support@aappayroll.com .
Full qualifying details can be found by clicking this link.
