ABC Taxes, Tips & Tools

The Hir­ing Incen­tives to Restore Employ­ment Act (HIRE) was signed in to law by Pres­i­dent Obama on March 18, 2010.  Under the new laws cer­tain employ­ers may ben­e­fit from hir­ing cer­tain kinds of new employ­ees.  The first break elim­i­nates the employer’s por­tion of the Social Secu­rity tax of 6.2%.  If the new employee is kept for 52 weeks a sec­ond tax credit kicks in.  The new tax breaks apply to employ­ees hired after Feb­ru­ary 3, 2010 and before Jan­u­ary 1, 2011.

The FICA tax break only applies to the Employer’s Social Secu­rity por­tion — the employer must still pay the Medicare Tax and col­lect both the Social Secu­rity and Medicare employee portions.

• The newly hired employee can­not have worked more than 40 hours in the last 60 days  in order to be eli­gi­ble for this tax credit.
• The employer can­not replace cur­rent employ­ees unless those employ­ees are dis­charged for cause or the employee quits voluntarily.
• The newly hired employee can­not be related to the employer.
• The newly hired employee can­not directly or indi­rectly own more than 50% of the company.
• A qual­i­fied employee may work any num­ber of full-time or part-time hours.

The tax break for March will show up as a credit on the Q2 941; for the rest of the year the employer can take the break into account when mak­ing reg­u­lar pay­roll deposits.  This tax credit CANNOT be taken in con­junc­tion with the Work Oppor­tu­nity Tax Credit (WOTC).  Employ­ers also CANNOT dou­ble up using the FICA Tip Credit either.   The sec­ond half of the credit kicks in after the employer has retained the employee for a year; the tax credit is the lesser of 6.2% of the employee’s wages or $1000.

As eager as an employer might be to take advan­tage of this tax credit, they should not use it as a con­di­tion of hire, which would prob­a­bly be a dis­crim­i­na­tory hir­ing prac­tice.   If an employer decides to hire some­one they should be care­ful about when and whether they ask the employee if they are long-term unem­ployed until after mak­ing a hir­ing deci­sion.  Once they decide to hire some­one then they can ask them to cer­tify that they have not been employed for more than 40 hours in the last 60 days.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in. The con­tent of this blog gen­er­ally applies to busi­ness and indi­vid­ual tax­a­tion in the United States of Amer­ica.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant, human resource spe­cial­ist, or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.

Tags: eligible employee, employer hiring incentive, FICA Tip Credit, HIRE, long-term unemployed, Tax Credit, Work Opportunity Tax Credit

This entry was posted on Wednesday, May 12th, 2010 at 7:27 pm and is filed under Business Taxes, HR Info. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.