An overview of the Hiring Incentives to Restore Employment Act

BY PAMELA GRIFFIN

It is critical that all employers are aware of the Hiring Incentives to Restore Employment (HIRE) Act, which was recently enacted into law. This is a two-part tax benefit for employers hiring workers who were previously unemployed or working only part time.

If an employer hires a qualified individual after February 3, 2010, the employer is exempt from the employer portion of the FICA tax (6.2 percent) on all wages paid to that employee from March 19, 2010, to December 31, 2010. Additionally, an employer is eligible for a business tax credit for each qualified employee who is employed by the employer for at least 52 consecutive weeks and whose wages during the second 26 weeks of the period are at least 80 percent of the wages during the first 26 weeks. The amount of the business tax credit is 6.2 percent of wages paid to that employee during the year, or a maximum of $1000.

As described above, the act contains two separate tax benefits to an employer that hires a qualified individual: the FICA tax exemption and the business tax credit. An employer can qualify for one or both of the credits.

A Qualified Individual is an employee who:

• Begins employment with a qualified employer after February 3, 2010, and before January 1, 2011.
• Certifies in a signed affidavit that they have not been employed for more than 40 hours during the 60 day period ending on the date the employee begins employment with a qualified employer. (They can use the IRS Form W-11 or a substitute form, which states the same.)
• Has not been hired to replace another employee unless the other employee left voluntarily or was terminated for cause.
• Is not related to the qualified employer or to anyone owning 50 percent or more of the stock or other capital of the employer.

If you plan on taking advantage of the FICA tax exemption, inform your accountant of the qualified employees by supplying them with the information on Form W-11. Exclusive of the first quarter of 2010, the FICA tax credit must be taken on the Federal 941 for which the wages were paid. The IRS has indicated that any FICA exemption that applies to wages paid during the quarter ending March 31, 2010, will be reflected on the second quarter of 2010. Also, please be aware that an employer is not allowed to combine this tax incentive with other tax credits such as the Work Opportunity Tax Credit or FICA Tip Tax Credit. ■

Pamela Griffin is managing partner of Capital Payroll Systems. She can be reached at pam@capitalpayroll.com or (508) 833-8644.


Published in Cape & Plymouth Business July 2010