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.
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