The Hiring Incentives to Restore Employment (HIRE) Act was signed into law by President Obama on March 18, 2010. This act has two main provisions that impact employers - a temporary exemption from social security taxes for certain newly hired employees and a tax credit for retaining these employees for 52 consecutive weeks.
Social Security Tax Exemption
The Social Security tax exemption applies to employees hired after February 3, 2010 who were previously unemployed for at least 60 days prior to being hired, or who worked less than a total of 40 hours in the 60-day period prior to beginning work for the new employer. Employers will save the 6.2% employer social security tax, up to the wage base limit, on wages paid to these employees after March 18, 2010, and before January 1, 2011. Household employees and family members are not considered eligible employees.
Eligible employers are businesses, agricultural employers, tax-exempt organizations, public colleges and universities. Other public sector jobs are generally not eligible for the benefit.
Eligible employees will be required to certify by “signed affidavit” under penalties of perjury that they have not been employed for more than 40 hours during the 60-day period prior their hire date. Employers are required to retain these statements for a currently undefined period of time.
Eligible positions are newly created positions or positions being filled because the worker left voluntarily or for cause (termination for a reason - inclusive of workforce reduction; “for cause” does not include termination to hire a family member).
Tax Credit
Employers that retain these eligible employees for 52 consecutive weeks after they are hired may be eligible to claim an additional tax credit up to $1,000 for each retained employee on their income tax return.
Additional Information
- The tax benefit of the new incentive is immediate. It puts money into a business’ cash flow immediately, since the tax is simply not collected in the first place.
- There is no minimum weekly number of hours that the new employee must work for the employer to be eligible, and there is no maximum on the dollar amount of payroll taxes per employer that may be forgiven.
- For workers that would otherwise be eligible for the “Work Opportunity Tax Credit,” the employer must select one benefit or the other for 2010—no double dipping.
- The incentive is not biased towards either low-wage or high-wage workers. Under the measure, a business saves 6.2% on both a $40,000 worker and a $90,000 worker.
- The payroll tax holiday does not apply with respect to wages paid during the first calendar quarter of 2010, but the amount by which the Social Security payroll tax would have been reduced under the payroll tax holiday provision during the fist calendar quarter is applied against the tax imposed on the employer for the second calendar quarter of 2010.
