Recent tax legislation has provided incentives for businesses to hire and retain employees. The Hiring Incentives to Restore Jobs Act ("HIRE") is also being called the Jobs Bill.
This legislation has provided employers with the following two tax breaks:
- The wages paid to eligible new employees are exempt from the employers' portion of the social security taxes from now until the end of 2010. To be eligible for this exclusion, the new employee needs to have been unemployed for at least 60 days and not worked more than 40 hours during this period. Additionally, the new employee cannot replace another employee of the employer. The 6.2% employer portion of the Social Security tax would be exempt for any qualified individual hired after February 3, 2010 and before January 1, 2011 for wages paid between March 19, 2010 and December 31, 2010 up to the $106,800 Social Security wage base. All eligible employees must certify by signed affidavit on Form W-11.
- Businesses can claim a tax credit up to $1,000 per each eligible employee that stays on the payroll for at least 52 consecutive weeks. The amount of the credit is the lesser of $1,000 or 6.2% of wages (as defined for income tax withholding purposes) paid by the employer to the retained qualified employee during the 52 consecutive week period. Additionally, the wages for the employment during the last 26 weeks of the period equal at least 80% of the wages for the first 26 weeks of the period. This credit will be claimed on the employers 2011 tax return. The credit can be carried forward but not backward.
ACTION ITEM: Employers considering hiring someone need to be familiar with the Jobs Bill. These tax breaks are a nice incentive.
Thomas F. Scanlon, CPA, CFP®