New Tax Benefits for Employers Who Hire and Retain Unemployed Workers
FEDERAL TAX BENEFITS
Under the federal Hiring Incentives to Restore Employment (HIRE) Act, two new tax benefits are available to employers who hire workers who were previously unemployed ("qualified employees").
Payroll Tax Exemption—provides employers with an exemption from the employer's 6.2 percent share of social security tax on wages paid to qualifying employees. This exemption is effective for wages paid from March 19, 2010 through December 31, 2010. Employers claim the payroll tax benefit on federal Form 941—Employers Quarterly Tax Return.
General Business Tax Credit—for each qualified employee retained for at least 52 consecutive weeks, businesses will be eligible for the new hire retention credit for up to $1,000 per worker. Employers claim the credit on their 2011 income tax returns.
The new law requires that the employer get a statement (IRS Form W-11) from each new hire certifying that he or she was unemployed or employed for less than a total of 40 hours during the 60-day period ending on the date employment begins.
Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit. Household employers cannot claim this new tax benefit.
Informational Article IR-2010-33 is available on the IRS website www.irs.gov
STATE OF CONNECTICUT TAX BENEFITS
In addition to the federal tax credits, the State of Connecticut has enacted two new tax credit incentives.
Small Business Jobs Creation Tax Credit—a qualified small business (50 or fewer employees) that hires a new employee who resides in Connecticut may be allowed a credit of $200 per month for each employee hired. “New employee” means a person hired by the qualified small business after January 1, 2010 and prior to January 1, 2013 to fill a new full-time job. A new employee does not include a person who was employed in Connecticut by a related person to the qualified small business during the prior 12 months. The credit is not allowed for any new employee who is an owner, member, or partner in the business or who is not employed at the close of the income year of the qualified small business.
Vocational Rehabilitation Job Creation Credit—an employer who hires a new qualifying employee who resides in Connecticut and requires the employee to work at least 20 hours or more per week for not less than 48 weeks in a calendar year may be allowed a tax credit of $200 per month for each new qualifying employee hired. The credit many not be claimed for any new qualifying employee who is an owner, member, or partner in the employer’s business or who is not employed at the close of the employer’s income year.
Informational Publication 95(2.1), Guide to Connecticut Corporation Business Tax Credits, is available on the DRS Web site www.ct.gov/drs