President Obama signed the Hiring Incentives to Restore Employment Act (HIRE ACT) on March 18, 2010. The HIRE ACT was enacted to foster job growth through immediate tax incentives to employers who hire formerly unemployed or part- time workers. The HIRE Act:
*Offers tax breaks to covered employers for hiring qualified individuals in 2010 on or after February 3, 2010;
*Gives employers incentives to retain workers for at least one year; and
*Applies to for-profit and not-for-profit private sector employers of any size, as well as public higher education institutions.
Employers who hire qualified formerly unemployed or part-time workers this year may be eligible for a 6.2% payroll tax incentive. Under the incentive, qualified employers are exempt from their share of Social Security taxes on wages paid to these workers after March 18, 2010.
General Business Tax Credit
For each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1000 per worker, when they file their 2011 income tax returns. In order for an employer to be eligible for the business tax credit, the qualified individual must be employed by the employer for a period of not less than 52 consecutive weeks, and the employee’s wages for such employment during the last 26 weeks of the period must equal at least 80% of the wages for the first 26 weeks of the period.
Revised forms and further guidance on the two new tax provisions will be released by the IRS in the near future. An employer should carefully consider whether it can benefit from this new law and should consult with their payroll or tax consultant.
For more information visit the IRS website at www.irs.gov