Tax Incentives for Businesses Hiring and Retaining Workers
The Hiring Incentives to Restore Employment (HIRE) Act, signed into law March 18, 2010, offers incentives for companies hiring unemployed people plus an additional credit for each qualified retained worker.
Employers can take advantage of reduced payroll taxes and increased tax credits as long as they meet certain eligibility requirements.
Payroll tax forgiveness for hiring unemployed workers:
Under the new law, employers will be exempt from paying the 6.2 percent Old-Age, Survivors, and Disability Insurance (OASDI) portion of Social Security tax on wages paid to qualified individuals. The tax will not apply on wages paid to qualified individuals for employment after March 18, 2010, and prior to January 1, 2011.
Employer and employee qualifications
All business types qualify with the exception of federal, state, or local governments (public higher education institutions do qualify). An employer may elect against the incentive on an employee-by-employee basis.
A qualified individual is anyone who:
1. Begins work for a qualified employer after February 3, 2010, and prior to January 1, 2011.
2. Certifies by signed affidavit (Form W-11), under penalties of perjury, that he or she had not been employed for more than 40 hours for the 60 days prior to employment starting.
3. Is not employed to replace a terminated employee, unless the former employee voluntarily separated from employment or was separated for cause.
4. Is not related to the employer, using rules similar to those that apply to the Work Opportunity Tax Credit (WOTC). If needed, consult your tax advisor for specific barred relationships.
Be sure to contact your payroll service before filing the 2nd quarter payroll taxes due by August 2, 2010 and let them know if you have any qualified employees and wages. Note that any first quarter benefits are taken into account on their second quarter 941 payroll report.
Call Bob at (805) 264-3305 or email at [email protected] if you have questions or need assistance.