Is Now the Right Time to “HIRE”?

If you were looking for the “right” time to staff up, now may be it. Earlier this month, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act into law effective immediately.  There are two primary incentives to encourage employers to hire staff including a tax incentive of 6.2%, which essentially offsets the employer’s portion of the FICA tax with a maximum credit of $6,621.00 for wages paid to qualified employees who were formerly unemployed.  This incentive will be claimed on the quarterly tax filing beginning with the filing for the second quarter.

The second incentive includes a tax credit for businesses of up to $1,000.00 if these employees are retained for 52 weeks or more, and the amount of pay they receive in the second 26-week period is essentially equal to the amount of pay they receive in the first 26-week period.

Whereas you should always hire the best person for the job, you may want to keep in mind the following when you are looking at candidates.

To qualify a newly-hired employee:

• Must start work after February 3, 2010 and before Jan 1, 2011.
• Must not have been an employee for more than 40 hours during the 60 days before start date.
• Must not replace a current employee (unless that employee was separated from employment voluntarily or for cause).
• Must not be related to the employer or directly or indirectly own more than 50% of the business.
• May be previously laid-off employees.
• May be part-time or less than full time employees.

The payroll tax forgiveness does not apply to wages paid in the first quarter of 2010. However, any amount that would have been allowed in the first quarter (i.e., wages on or after March 18, 2010) would be credited against the employer’s OASDI liability for the second quarter. Beginning for new hire wages paid beginning April 1, 2010, the employer would take the OASDI forgiveness into account for regularly deposited payroll taxes.

In order to receive the retention credit the new worker must:

• Be employed 52 consecutive weeks. A prorated credit for a short period is not allowed.
• Domestics and workers eligible for a “foreign earned income exclusion” are not eligible.

The tax credit will be available to most employers on the 2011 income tax return. It should be noted, however, that the HIRE Act does not allow carry back of any unused Section 38 business credit that is attributable to the provision for retained workers.

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Comments

[andrew]

Does anyone know if the $1K credit or tax incentive is per employee?

[Scott Andreassen]

Andrew - it is per employee.