Seize Your Share of Top Talent and Get Your Share of HIRE Act Tax Breaks

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To stimulate the economy and reduce unemployment, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act on March 18, 2010. The ‘HIRE Act’ is centered around two provisions designed to reduce unemployment by providing tax incentives to businesses that hire unemployed workers.

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With the economy on track for recovery, smart companies are wasting no time to ensure they secure the top employees they need before hiring gets competitive. As the unemployment rate continues to ratchet down, so will the availability of outstanding professionals that once flooded the market. When combined with the HIRE Act incentives, this creates a momentary window of opportunity businesses that hire now.

Employer Tax Breaks

This tax break can save an employer up 44% of employer burden on qualified employees. The HIRE Act exempts employers from having to pay the 6.2 percent employer portion of the Social Security taxes on qualified new hires through the end of the year. Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly hired employees. To qualify, the new employee must have been hired after February 3, 2010, and before January 1, 2011. The new hire must also have been unemployed (or have not worked more than 40 hours) for the 60-day period immediately preceding his or her start date. Since wages exceeding $106,800 aren’t subject to the Social Security payroll tax, the maximum value of the break per employee is $6,621.60. It is interesting to note that the new hire doesn’t have to be a full-time employee. In fact, there’s no minimum hour requirement.

For employers to receive the tax break, their new employee must meet the following criteria:

  1. The new hire must have a start date between February 3, 2010 and January 1, 2011
  2. The new hire was not hired to replace another employee, unless the employee voluntarily quit or was terminated for cause
  3. The new hire is not related to the employer or owns (directly or indirectly) more than 50 % of the business.
  4. The new hire must sign an IRS affidavit attesting that he or she was employed no more than 40 hours (if at all) during the last 60 days prior to employment

Giving Retention Due Credit

To further reduce unemployment, the HIRE Act gives employers a tax credit for each qualified worker retained for at least a year. Businesses may claim an additional general business tax credit, up to $1,000 per qualified worker, when they file their 2011 income tax returns.

Here are a few other important considerations related to the retention credit:

  • In the last 26 weeks of the year, the employee must be paid wages equal to at least 80 percent of what he or she was paid during the first 26 weeks.
  • The employee must be employed for 52 weeks. No partial credit will be given if the employee voluntarily leaves or is terminated before the end of the one-year period.
  • Due to the 52-week requirement, employers generally won’t enjoy the benefit from this credit until they file their 2011 tax returns.

“The HIRE Act’s tax breaks provide great benefits to employers who expand their payrolls,” says Act•1 Group Vice President of Sales and Marketing Marc Goldman. “Businesses should keep these benefits in mind as they plan for the year ahead. When combined with the still-robust availability of outstanding candidates, now is a truly opportune time for companies to strengthen productivity and regain their competitive edge.”

The information contained on this site is intended for general consumer understanding and education only and is not intended to be and is not a substitute for professional accounting or legal advice.

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