Hiring Incentives to Restore Employment Act Tax Incentives to Spur Job Growth
On March 18, 2010, President Obama signed into law a $17.5 billion dollar jobs bill entitled the Hiring Incentives to Restore Employment (HIRE) Act. This bill includes a number of government incentives for hiring, including tax cuts, business credits and subsidies for state and local construction bonds, and moves an additional $20 billion into the highway trust fund for new spending on highway and transit programs. The HIRE Act is aimed at providing hiring incentives for employers to restore some of the jobs lost during “the great recession.”
Another item of interest under the HIRE Act is that it permits small business owners the opportunity to write off equipment investments of up to $250,000 in 2010 rather than taking years to depreciate those items. This doubles the previous amount of $125,000. The objective here is to provide tax incentives for small businesses to grow while stimulating the economy with their investment spend.
In a nutshell, HIRE provides that employers who hire and retain unemployed workers after February 3, 2010 through December 31, 2010, may qualify for a 6.2% payroll tax incentive in effect exempting them from their share of Social Security taxes on wages paid those workers after March 18, 2010. This reduced tax withholding will have no effect on an employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2% share of Social Security taxes, as well as income taxes. The employer and employee’s share of Medicare taxes would also still apply to these wages.
Likewise, an employer may claim on its 2011 federal income tax return an additional business tax credit of up to $1,000 for each employee hired under the Act who is retained for at least one year. The retention credit is the lesser of either 6.2 percent of the wages paid by the employer to the retained qualified employee during the 52 consecutive week period or $1,000.
Some of the requirements and limitations placed upon employers, and how workers qualify under the Hiring Incentives to Restore Employment Act include the following:
- Employers that want to claim this tax incentive must obtain from each eligible new employee a statement that certifies that he/she was unemployed during the 60 days before beginning work or that they worked fewer than 40 hours for any other employer during this 60 day period;
- New hires filling existing open positions will qualify provided they are replacing workers who were terminated for cause or quit;
- Family members or other relatives of the employer do not quality;
- Household employers do not qualify but businesses, agricultural employers, tax-exempt organizations, public colleges and universities and Native American tribal governments do;
- The 6.2% payroll tax incentive may apply to rehires provided they were unemployed or underemployed for 60 days immediately prior to their rehire; and,
- The retention credit is available for each qualified employee who remains employed for 52 consecutive weeks provided their wages do not decrease significantly in the second half of the year.
Regarding the requirement placed upon employers to obtain from new employees a statement certifying that he/she was unemployed during the 60 days before beginning work or that they worked fewer than 40 hours for any employer during this 60 day period, the IRS created Form W-11 for their usage to meet this obligation. Employers need not file these statements with the IRS, but instead, need only retain them along with other payroll and tax records. To obtain and download a copy of IRS Form W-11, go to either:
Please take note that the HIRE Act does not excuse employers from complying with all applicable state and federal anti-discrimination and employment related laws.
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