ABC Taxes, Tips & Tools

The Hir­ing Incen­tives to Restore Employ­ment Act (HIRE) was signed in to law by Pres­i­dent Obama on March 18, 2010. If an employer hires a worker after Feb­ru­ary 3, 2010 and before Jan­u­ary 1, 2011 and this worker has been out of worker for more than 60 days, the employer is eli­gi­ble for cer­tain tax cred­its.  House­hold employ­ees are not eli­gi­ble for HIRE and nei­ther are busi­ness own­ers or their rel­a­tives, but recent grad­u­ates and minors are. 

• The HIRE tax credit is a 6.2%  Social Secu­rity Tax break, up to the lesser of 6.2% of the employ­ees wages or $1,000. The employer takes the credit on their pay­roll tax forms, by reduc­ing the employer por­tion Social Secu­rity to zero for eli­gi­ble employees.
• Then there is a HIRE Reten­tion Credit which kicks in 2011 if a new employee is retain for 52 weeks and does not see a sig­nif­i­cant change in pay dur­ing the sec­ond half the year.  It also is the lesser of 6.2% of wages or $1,000.
• Work Oppor­tu­nity Tax Credit (WOTC) is $40% of the first $6,000 in wages and could be as much as $2,400.  Of course WOTC applies to a spe­cific class of indi­vid­u­als who face dif­fi­cul­ties get­ting into the work­force: Wel­fare recip­i­ents, dis­abled vet­er­ans, res­i­dents of cer­tain geo­graphic locales, and dis­con­nected youth-so not all new hires will qual­ify for WOTC, but some might. 
•  How­ever the HIRE tax credit can not be taken with the WOTC.  But the HIRE Reten­tion Credit can be taken with WOTC. 
• Finally, if an employer was tak­ing the COBRA assis­tance credit, because they laid of a given employee, and that employee was  laid off for more than the 60-day period, the employer can rehire that employee, who will be eli­gi­ble for HIRE tax credit too. 

If an employer does hire a new employee that qual­i­fies for HIRE and WOTC its prob­a­bly a good idea to see which tax credit is the most ben­e­fi­cial to them.  An employer can elect to bypass HIRE in favor of WOTC.  If an employer has already taken HIRE on an employee and decides that WOTC would be a bet­ter deal, they need to file an amended employ­ment tax return, 941-x, for each quar­ter they took the HIRE and repay the social secu­rity tax.  Once that is done the employer can take WOTC. 

More infor­ma­tion on the HIRE credit.  Employ­ees are to cer­tify that they have not been employed more than 40 hours in the 60 day prior to hire using Form W-11 or com­pa­ra­ble document. The 60-day period of unploye­ment must be con­tin­u­ous but can bridge 2009–2010.   The doc­u­ment is to be kept in the employer’s files.  Elec­tronic ver­sions with elec­tronic sig­na­tures are valid. Scanned images of signed paper W-11s are valid.  W-11s and equiv­a­lent need not be nota­rized. The W-11 must be signed, com­pleted and in the employer’s hands before the employer can claim the HIRE credit on their form 941.  If the employer real­izes they have claimed the credit for an inel­i­gi­ble employee they must amend the 941 on which they claimed the credit and pay the tax.  Temp agen­cies are eli­gi­ble for the credit, so if the temp agency claims the credit for a given employee, the employer can not; employ­ers should nego­ti­ate with temp agen­cies to pass the exemp­tion sav­ing through to them.  The credit is only for wages actu­ally paid (not earned) dur­ing March 19, 2010 and Decem­ber 31, 2010. 

In other unem­ploy­ment news, the COBRA sub­sidy has been expanded to included employ­ees laid off through May 31, 2010 and goes through Decem­ber 31, 2010.  For­mer employ­ees are still only eli­gi­ble for 18 months of COBRA assis­tance, but for newly laid off work­ers, this sub­sidy is some good news. 

Also the time to close on a home, get an occu­pancy certificate, and qual­ify for the Home Buyer’s Credit is extended to August 31, 2010–how­ever the con­tract still must have been entered into by April 30, 2010. 

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, finan­cial plan advi­sor 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.