The Hiring Incentives to Restore Employment (HIRE) Act
The Hiring Incentives to Restore Employment (HIRE) Act includes two new tax incentives for employers. More information can also be found on the IRS website
The New Hire Tax Credit provides employers with up to $1,000 for employing a qualified worker for at least 52 consecutive weeks, providing that the employee’s salary does not decrease significantly in the second half of the year. The amount of the credit is the lesser of $1,000 or 6.2% of the employee’s wages.
The New Hire Tax Credit will be claimed on the employer’s 2011 federal tax return.
The Payroll Tax Exemption allows employers to exempt the 6.2% social security tax on wages paid to qualifying employees, effective on wages paid from March 19, 2010 through December 31, 2010. Employees must still pay social security tax, and both employers and employees must still pay Medicare tax. Business and tax-exempt organizations are eligible for this exemption.
The Payroll Tax Exemption is claimed by submitting IRS Form 941 with the employer’s federal tax return, beginning in the second quarter.
Who is a Qualifying Employee? Qualifying employees are individuals who begin employment after February 3, 2010, and before January 1, 2011, who have been unemployed or employed for less than 40 hours during the 60-day period prior to the date that employment begins, and who are not family members of or related in certain ways to the employer. Please note that while an employee may have been hired as early as February 3, 2010 to allow an employer to be eligible for either of the tax incentives, the incentives only apply to wages paid on or after March 19, 2010.
Can an employer claim both a HIRE Act incentive and the Work Opportunity Tax Credit (WOTC)?
Employers may claim the New Hire Tax Credit that is part of the HIRE Act AND the Work Opportunity Tax Credit. For more information on WOTC and employees that qualify, click here
Employers may claim EITHER the Payroll Tax Exemption that is part of the HIRE Act OR the Work Opportunity Tax Credit, but not both.