Today the President signed into law the Hiring Incentives to Restore Employment (HIRE) Act, which focuses on the hiring of unemployed workers.
The HIRE Act has provisions that impact employers, including a payroll tax exemption, and increased tax credits for employers that meet certain eligibility requirements. Employers can immediately enhance their cash flow by retaining the employer portion of the Social Security tax ordinarily remitted.
HERE ARE THE KEY ASPECTS OF THE NEW HIRE ACT.
Social Security Tax Exemption The 6.2% Employer Social Security Tax exemption applies to 2010 wages paid after March 18 and before January 1, 2011, to individuals hired after February 3, 2010, who were previously unemployed for at least 60 days and who do not exceed the $106,800 Social Security wage base.
- Employers can save the 6.2% Employer Social Security Tax , whether they hire a $20,000 worker, or a $70,000 worker. This tax relief begins accruing with each payroll processed.
- The earlier in the year the employers hire new workers the greater the tax benefit will be. For example, a $70,000 worker hired on April 1 saves an employer about $3,255 in taxes. Delaying the hiring until July 1 would reduce savings to about $2,170
- This exemption has no cap or limit as to the total amount of tax benefits that can be claimed by an employer. Employers can save up to $6,622 per qualifying worker, whether they hire one worker or hundreds of new workers.
Tax Credit Employers will receive an income tax credit, which is either $1,000 for each qualifying worker hired after February 3, 2010, and employed for at least 52 consecutive weeks, or 6.2% of wages paid to the qualifying worker over the 52-week period, whichever is less. Wages during the last 26 weeks must be at least 80 percent of wages paid for the first 26 weeks.
- New hires must certify, under penalties of perjury, that he/she has "not been employed for more than 40 hours during the 60-day period ending on the date such individual begins employment."
- Employers cannot use the 6.2% Employer Social Security Tax exemption nor the retention tax credit if a person is hired to replace another employee "unless such other employee is separated from employment voluntarily or for cause."
- New hires must be hired after Feb 3, 2010 and be employed for at least 52 consecutive weeks.
Other Business Incentives For tax years beginning in 2010, the maximum section 179 deduction increases to $250,000 and boosts to $800,000 the beginning of the investment based phase-out amount.
RECOMMENDATIONS.
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Ensure you have procedures and documentation in place to support new hire qualification for this exemption and credit
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Ensure your payroll system has been updated to take into account the exemption for employer paid social security on new hires
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Interview new hires thoroughly to ensure they meet the new hire qualification requirements
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Look at converting contract employees to new hires
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Good time to look at outsourcing your payroll
How we can help.
We provide full-service payroll/HR service. Our payroll platform is already fully compliant with all aspects of the Federal Hire Act of 2010. We have documentation in place to support the new Tax Credit employee-required affidavit certification of prior employment. Our full service payroll offering includes payroll processing, reporting, tax deposits, and HR related services. Please visit our website to fill out the form to register for a free analysis of your payroll, accounting and tax needs. www.gurrcpa.com/alert.php
