Can You Benefit From HIRE?
 By Stephen A. Lanvil

In March, the federal government provided a little extra encouragement for businesses to hire unemployed workers. That encouragement came with the passage of the Hiring Incentives to Restore Employment Act, or HIRE Act.

The HIRE Act provides tax two potential breaks to companies that hire individuals who meet the definition of an unemployed worker before Jan. 1, 2011:

1. A payroll tax exemption of the employer’s 6.2-percent share of Social Security taxes on wages paid to these workers through the end of this year. Note, however, that you are still required to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes and both the employer’s and employee’s share of Medicare taxes. Workers must be hired after Feb. 3, 2010, and before Jan. 1, 2011. The Social Security tax forgiveness is applied to wages paid between March 19, 2010, and Dec. 31, 2010. There’s no limit on total number of hires during this period.
2. A new hire retention tax credit of 6.2 percent of wages paid to these workers who stay on the job for at least 52 consecutive weeks, up to a maximum credit of $1,000. You’ll be eligible to take this credit when you file your 2011 income tax return. Because this credit disappears on Jan. 1, 2011, you can maximize your potential tax credit by hiring qualified new employees sooner rather than later.

Which Workers Qualify?
To qualify as a “previously unemployed worker,” under the law, a new hire must have been unemployed during the 60 days before starting work for your company, or have worked fewer than 40 hours for someone else during this 60-day period.

You must obtain a statement from the new employee certifying this fact. The certification can be done via the new IRS Form W-11.

You’ll need this certification in order to claim both the payroll tax exemption and the new hire retention credit. Be sure to retain it along with other payroll and income tax records. However, you won’t file this statement with the IRS. Instead, you’ll use Form 941, Employer’s Quarterly Federal Tax Return, to claim the payroll tax credit for eligible new hires.

The tax credits are available for employees hired to fill new positions created at your company, as well as existing positions if the employee who was replaced left voluntarily or for cause. Employees can be part time, full time or seasonal. Also, employees previously laid off may qualify.

Certain employees don’t qualify for the HIRE Act credits:

• Family members and other relatives
• Household employees
• Government employees

For More Information
For more details on the Hiring Incentives to Restore Employment Act, including detailed questions and answers, visit http://www.irs.gov.

And be sure to consult your tax advisor with regard to how the act may apply to your particular situation.

Still have questions? The online CPAs with AFS ProTax have answers.

As an AFS Member you have unlimited access to advice from the CPAs at no additional cost. Get the confidential answers you need within two business days.

(Posted June 2010)

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