On March 18, 2010, the Hiring Incentives to Restore Employment Act (the "HIRE Act") was enacted into law. Under this new law, employers who hire unemployed workers between February 3, 2010 and January 1, 2011 may qualify for a 6.2% payroll tax incentive, in effect exempting employers from their share of Social Security taxes on wages paid to these workers after March 18, 2010. In addition to the payroll tax incentive, for each new employee retained for at least a year, employers may claim an additional general business tax credit, up to $1,000 per worker or 6.2% of wages paid to the qualifying worker over the 52-week period, when filing their 2011 income tax returns. Businesses, agricultural employers, tax-exempt organizations, and public colleges and universities all qualify to claim these payroll tax benefits for eligible newly hired employees.
These tax benefits are applicable to most employers that are currently adding new positions to their payrolls, as well as new hires filling existing positions, provided the workers they are replacing left voluntarily or were terminated for cause.
To qualify for the hiring tax benefits, the HIRE Act requires the employer to obtain a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours during the prior 60-day period. The Internal Revenue Service is currently developing a form employees can use to make the required statement. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. Revised forms and further details on these two new tax provisions will be posted on www.irs.gov
during the next few weeks.