In an effort to help reduce the unemployment rate and stimulate hiring, there are two new tax benefits available to employers who hire and retain workers who were previously unemployed.
Employers who hire unemployed workers after February 3, 2010 and before January 1, 2011 may qualify for a 6.2% tax incentive. This would effectively make them exempt from their share of Social Security taxes on wages paid after the date of the enactment (March 18, 2010). The employee’s future Social Security earnings are not affected by this and the employer would still withhold the employee’s 6.2% of Social Security taxes.
For workers who are retained for at least one year, there may be an additional tax credit up to $1,000 per worker. This would be claimed on the 2011 tax return.
As usual, specific criteria must be met in order to qualify:
- The employer will have to get a signed affidavit from each new hire that certifies that he or she was unemployed during the 60 days prior to beginning work and did not work more than 40 hours during that time. The IRS created Form W-11that will be required for the employees can make this statement.
- The employee cannot be replacing another employee of the qualified employer, unless the other employee voluntarily quit or was fired with cause.
- The employee is not related to the employer in a way that would make him or her ineligible for the work opportunity credit.
For employers who may have been reluctant to expand their employee base, the HIRE Act could provide incentives to hire and help people get back to work. If you are considering hiring and would like to further discuss maximizing this tax credit, please contact your HLB Gross Collins, P.C. representative.