New Tax Savings Potential for new HIRE's
Two new tax benefits are now available to employers hiring workers
who were previously unemployed or only working part time. These
provisions are part of the Hiring Incentives to Restore Employment
(HIRE) Act enacted into law today.
Employers who hire unemployed workers this year (after Feb. 3, 2010
and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax
incentive, in effect exempting them from their share of Social Security
taxes on wages paid to these workers after March 18, 2010. This reduced
tax withholding will have no effect on the employee’s future Social
Security benefits, and employers would still need to withhold the
employee’s 6.2-percent share of Social Security taxes, as well as income
taxes. The employer and employee’s shares of Medicare taxes would also
still apply to these wages.
In addition, for each worker retained for at least a year, businesses
may claim an additional general business tax credit, up to $1,000 per
worker, when they file their 2011 income tax returns.
The two tax benefits are especially helpful to employers who are
adding positions to their payrolls. New hires filling existing positions
also qualify but only if the workers they are replacing left
voluntarily or for cause. Family members and other relatives do not
qualify.
In addition, the new law requires that the employer get a statement
from each eligible new hire certifying that 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 is currently developing a form employees can use to make the
required statement.
Businesses, agricultural employers, tax-exempt organizations and
public colleges and universities all qualify to claim the payroll tax
benefit for eligible newly-hired employees. Household employers cannot
claim this new tax benefit.
Employers claim the payroll tax benefit on the federal employment tax
return they file, usually quarterly, with the IRS. Eligible employers
will be able to claim the new tax incentive on their revised employment
tax form for the second quarter of 2010.
