On March 18, 2010 President Obama signed into law the Hiring Incentives to Restore
Employment (HIRE) Act (HR 2847), which is focused on accelerating the hiring of unemployed workers. Although there are many provisions of the act, there are two elements that come into play immediately in 2010: an employer FICA exemption for 2010 for new hires and an employer tax credit in 2011 for each qualified employee.
An employer may utilize BOTH the payroll tax exemption and the new hire credit on the same employee and new businesses also qualify if the employee qualifies.
Qualification Summary
Hired After Hired Before Wages After Exemption
2/3/20101/1/2011 3/18/2010 6.2%
Social Security Tax Exemption
The 6.2% Employer Social Security Tax exemption applies to previously unemployed individuals hired after February 3, 2010 who have worked less than 40 hours during the 60-day period prior to employment and whose 2010 earned wages after March 18, 2010 and before January 1, 2011 do not exceed $106,800.
Employers can save the 6.2% Employer Social Security Tax, whether they hire a $40,000 worker, or a $90,000 worker. Employers would not have to wait to benefit from this tax reliefbecause savings occur with each payroll processed.
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.
The legislation also encourages businesses to hire workers earlier in the year because the tax benefit will be greater.
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.
General rules for both the exemption and the credit
Any new hire must certify "by signed affidavit," 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 such employment." The IRS has released Form W-11 to act as the Affidavit, as shown on the next pages. The Form is kept in the employee file, it is
not sent to the IRS.
Neither the 6.2% Employer Social Security Tax exemption nor the retention tax credit is permitted if a person is hired to replace another employee "unless such other employee is separated from employment voluntarily or for cause."
Similarly no forgiveness or credit is allowed for newly hired family members of the business owner.
