The Hiring Incentives to Restore Employment (HIRE) Act, which was enacted March 18, 2010, has two new tax benefits that are available to employers who hire certain previously unemployed workers (“qualified employees”).
The first is referred to as the payroll tax exemption. It provides employers with an exemption for the employer’s 6.2 percent share of social security tax on wages paid to qualifying employees, effective for wages paid from March 19, 2010 through December 31, 2010. You can claim the payroll exemption either on your quarterly 941 or on your yearly 944.
Also for each qualified employee that the business retains for at least 52 consecutive weeks, the businesses will also be eligible for a general business tax credit, referred to as the new hire retention credit, up to a maximum credit of $1,000 per worker. This credit applies to employees hired after February 3, 2010, and before January 1, 2011. This credit can be claimed in 2011.
Both of these tax benefits will be very helpful to employers who add positions to their payrolls. New hires filling existing positions will qualify if the workers they are replacing left voluntarily or for cause. Family members and other relatives are not eligible for the tax credit.
The new law requires that the employer obtain a form W-11 or a similar statement from each eligible new hire who has to certify that he or she was unemployed during the 60 days before beginning work or, alternatively, worked no more than 40 hours for anyone during the 60-day period.
Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit.
Janette L. Davis, CPA is the President of Janette L. Davis, CPA, LLC. She has been a Certified P