Last month, President Barack Obama signed legislation that provides tax breaks to employers that hire and retain new employees in 2010. The Hiring Incentives to Restore Employment (HIRE) Act, has many provisions that impact employers, including a payroll tax exemption, and increased tax credits for employers that meet certain eligibility requirements. Most notably, the legislation permits employers to retain the employer portion of the Social Security tax ordinarily remitted.
The 6.2% Employer Social Security Tax exemption in the HIRE Act applies to 2010 wages paid after March 18. Employers are eligible for the exemption if the new employee was previously unemployed for a minimum of 60 days and who do not exceed the $106,800 Social Security wage base. The exemption covers new hires who begin employment after February 3, 2010 and before January 1, 2011.
The HIRE Act requires that any new hire must certify “by signed affidavit,” under penalties of perjury, that he/she has “not been employed for more than 40 hours during the 60-day period ending on the date such individual begins such employment.” Now, the IRS has created a form for this purpose, which can be found on HR.BLR.com (see HIRE Act Employee Affidavit (W-11))
Employers will also receive an income tax credit under the new law, of either:
- $1,000 for each qualifying worker hired after February 3, 2010, and employed for at least 52 consecutive weeks, or
- 6.2% of wages paid to the qualifying worker over the 52-week period, whichever is less.
Wages during the last 26 weeks must be at least 80 percent of wages paid for the first 26 weeks.
Neither the 6.2% Employer Social Security Tax exemption nor the retention tax credit is permitted if a person is hired to replace another employee “unless such other employee is separated from employment voluntarily or for cause.”
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