The Hiring Incentives to Restore Employment (HIRE) Act. became law on March 18, 2010.
This law made two new tax benefits available to employers hiring new workers who were previously unemployed or who were only working part time.
Two new tax breaks include one to be claimed as an exemption and the other as a tax credit:
1. 6.2 % payroll tax exemption
2. Tax credit up to $1,000 per worker
WHICH JOBS ARE COVERED UNDER THIS LAW
The new employment should have been provided after February 3, 2010, and before January 1, 2011.
The new jobs should have been given to persons who
-were unemployed during the previous 60 days
-worked 40 hours or less for anyone during the previous 60 days
The newly hired employee has to sign a Form W-11 (or similar signed affidavit), certifying he or she was not employed for more than 40 hours during the 60 days before beginning employment.
WHICH EMPLOYERS CAN CLAIM THESE BENEFITS
Qualified employers include
*Businesses-both small and large businesses,
*PUBLIC colleges or universities,
*Indian tribal government
Such employers will have to get Form W-11 (or similar signed affidavit) from new hires, certifying they were not employed for more than 40 hours during the 60 days before beginning employment
WHICH EMPLOYERS CANNOT CLAIM THESE BENEFITS
The following types of employers do not qualify:
*Government (except public colleges and universities)
1. EXEMPTION: 6.2% payroll tax exemption
Qualified employers as mentioned above may claim an exemption from the 6.2 % share of social security tax on wages paid to SUCH new qualified employees.
This can be claimed for wages paid from March 19, 2010, through December 31, 2010 to such new hires.
How to claim:
– Form 941, Employer’s Quarterly Federal Tax Return
– Annual payroll tax returns e.g., Form 944, Employer’s ANNUAL Federal Tax Return.
2. CREDIT: Tax credit up to $1,000 per worker
This is an additional new hire retention credit, up to $1,000 for each qualified employee.
But this brings in extra requirements too beyond the act of just hiring:
The employer should have
– retained the employee for at least a year
– such wages are not significantly reduced in the second half of the year.
So, in short,
an employer cannot cheat by just hiring to make a claim and then eat the cake and have it too by firing the employee too soon or by reducing the wages drastically.
How to claim:
– Income tax return for the business, in tax year 2011.
PLEASE NOTE: This is a basic introduction to the tax benefits of the HIRE Act of 2010 for information purpose only. Since rules can be updated any time, reader should refer to the official resources on this subject provided by the IRS for the latest and authoritative information on this subject.