Employers Who Hired in 2010 Could Qualify for HIRE Act Tax Exemption

December 30, 2010

There is no doubt that those who have been hired in the last year are considered fortunate. The HIRE Act can help to extend that fortune to qualifying employers as well. The Hiring Incentives to Restore Employment (HIRE) Act was put into place in March 2010. The intention was to motivate businesses to hire employees for new positions by offering tax incentives; not to mention creating employment for previously unemployed Americans. Businesses can take advantage of the 6.2% payroll incentive directly related to hiring employees and writing off investments in equipment.

Business owners who hired qualifying individuals before January 1, 2011 can reap the benefits. The 6.2% payroll incentive in essence is a tax exemption of the employer’s share of Social Security taxes on wages paid to these workers after March 18, 2010. Additionally, there is an employer tax credit of up to $1,000 per qualifying worker, and for small businesses the ability to write off equipment investments up to $250,000. The act will have no effect on the future of the employee’s Social Security and employers will still be able to withhold the 6.2% of Social Security. Medicare will still apply to wages.

Qualifying employees are defined as those who were:

  • hired between February 3, 2010 and January 1, 2011;
  • unemployed during the 60 days prior to starting work, or worked fewer than 40 hours for someone else during the 60 day period; and
  • able to provide proof of unemployment during the 60 days before beginning work, or worked no more than 40 hours during the 60 days before beginning work.

Though the deadline to hire has nearly expired, the incentives can still be taken advantage of. Small business that created new positions in the last year will especially see the benefits when utilizing the act. If a new hire was brought on to fill an existing position, the act can only be applied if the preceding employee left voluntarily or with cause. Family members and relatives do not qualify. Household employers cannot claim this tax benefit. To claim exemption, note the incentive on tax Form 941.

For more information please visit: www.hireact.org or www.irs.gov and search for HIRE Act.