HIRE Act Provides Employers with Two New Tax Benefits

April 15th, 2010 | By Jules Halpern Associates | Hiring, Unemployment, Wages and Hours

The Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, provides employers who hire certain previously unemployed or part-time workers (referred to as “qualified employees”) with two new tax benefits: (1) a payroll tax exemption, and (2) a business tax credit.

Employers who hire unemployed workers between February 3, 2010 and January 1, 2011, may qualify for a payroll tax exemption. The payroll tax exemption provides employers with an exemption from the employer’s 6.2% share of social security tax on wages paid to qualifying employees, effective for wages paid from March 19, 2010 through December 31, 2010. Employers claim the payroll tax exemption on Form 941 (“Employer’s Quarterly Federal Tax Return”), beginning with the second quarter of 2010.

In addition, for each qualified employee retained for at least 52 consecutive weeks, businesses will be eligible for a general business tax credit (referred to as the “new hire retention credit”) of 6.2% of wages paid to each qualified employee over the 52-week period (up to a maximum credit of $1,000), when they file their 2011 income tax returns.

The HIRE Act requires employers obtain a statement from each eligible new hire certifying he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS recently developed a model form (Form W-11) that employees can use to make the required statement.

For more information on the HIRE Act, including “FAQs” and Form W-11, visit the Internal Revenue Service’s website. The IRS has also published revised W2 and W3 forms based on changes made by the HIRE Act, along with 2010 Instructions for those new forms.

Jules Halpern Associates LLC

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Jules Halpern Associates LLC
JULES HALPERN ASSOCIATES LLC is a boutique law firm committed to serving our clients in all facets of their workplace issues. We provide personalized, practical advice that resonates with our clients’ business objectives.
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