How The HIRE Act Can Help Your Organization
The Hiring Incentives to Restore Employment (HIRE) Act was signed by the President on March 18, 2010. The HIRE Act provides hiring incentives to help restore some of the jobs lost in the latest economic recession and put Americans back to work as soon as possible. This new legislation includes tax benefits related to hiring employees and writing off investments in equipment.
Tax Incentive For Hiring
An important piece of the HIRE Act is a new tax incentive designed to encourage businesses to hire unemployed workers. The tax incentive includes both an exemption from payment of employer Social Security taxes and a tax credit of up to $1,000 per hired worker.
Qualifications For Tax Incentive
The 6.2 percent Social Security tax exemption begins with wages paid after March 18, 2010, the date the bill was signed into law, and lasts until December 31, 2010. The new employee cannot replace other employees, and in order to qualify, an employee must provide a statement indicating they were unemployed 60 days before beginning work or that they worked less than 40 hours total for someone else during the 60 days before beginning work. The IRS has developed Form W-11 for this purpose. Only employees who meet all the requirements of a qualified employee may complete this affidavit. Form W-11 requires qualified individuals to provide their name, Social Security Number, first date of employment, and the name of the employer. For an employer to receive the tax benefits under the HIRE Act, including the payroll tax exemption or the new hire retention credit, Form W-11 must be completed and signed by the employee. Form W-11 is not filed with the IRS. Rather, employers must retain them along with other payroll and income tax records. For more information and to obtain a copy of the Form W-11, visit http://www.irs.gov/newsroom/article/0,,id=221036,00.html.
This reduced tax withholding will have no effect on employeesí future Social Security benefits. Keep in mind that you will still need to withhold the employeeís share of Social Security taxes, income taxes, and employer and employeesí shares of Medicare taxes.
If your company retains workers hired under the HIRE Act for at least a year, your company can claim a tax credit of up to $1,000 per worker. The credit is claimed on the 2010 income tax return. The worker must be employed for at least 52 consecutive weeks and the wages for the last 26 weeks must equal at least 80 percent of the wage for the first 26-week period.
Businesses that hire qualifying workers sooner rather than later will get the most out of the tax credits, as the tax credits diminish over time, disappearing completely by January 1, 2011.
HIRE Act And Sage Abra Suite
Changes have been made to both Sage Abra Suite and Sage Abra SQL HRMS to accommodate the provisions of the HIRE Act.
Give us a call if you have any questions about how the HIRE Act impacts your business.