The Hiring Incentives to Restore Employment Act of 2010 (HIRE) became law on March 18, 2010, as signed by President Obama. Unfortunately, this new law did not get a lot of press due to the Health Care Reform Passage, but is critical for employers who intend to hire.
Under this law, an employer who hires an employee after February 3, 2010 and before January 1, 2011, will receive a tax credit equal to the employer’s portion of the Social Security tax (FICA) for hiring an unemployed worker for new positions or replacement for employees who resign or discharged for cause. All employers except government institutions are eligible for this great tax credit.
Key facts of the HIRE Act:
- Temporary payroll tax forgiveness of the employers 6.2% share of Social Security taxes (FICA) on wages paid to new hires. Employers will not have to match 6.2% of FICA on the employee’s wages for 2010. The exemption is effective March 19, 2010 to December 31, 2010.
- There is an additional general business income tax break of $1000 per employee hired for all businesses who hire a qualified employee under the ACT. This applies only if the employer continues to employ the employee for 52 weeks.
- Revised IRS Form 941 (Employers quarterly federal tax return) to document these tax credits.
To qualify for ACT, employees:
- Must be hired after Feb. 3, 2010, and before January 1, 2011.
- Must certify and sign an affidavit stating the employee had not been employed for more than 40 hours during the 60 days period prior to the new hire date with new employer. On April 7, 2010, the IRS released its final version of Form W-11 which is the HIRE Employee Affidavit. The IRS does not require employers to send the affidavits in, however, these should be kept in the employee’s file.
- Must be employed for a new position or replacing an employee who voluntarily quit or discharged for cause.
- Are not covered by the Work Opportunity Tax Credit program.
- Are not relatives of the employer.
- Can not earn more than $106,000 per year.
