Health Care Reform headlines overshadowed a new tax credit available to employers as part of the Hiring Incentives to Restore Employment Act (HIRE) enacted into law on March 18, 2010. HIRE creates the potential for employers to reap tax savings up to $6,622 per worker, with no cap on the allowable credits.
Claiming a HIRE tax credit is not simple, here are the basics;
- The credit can only be claimed for a new job or one being filled because an employee quit or was terminated. It won’t work for replacements after layoffs or hiring relatives.
- The employee who is hired has to have been unemployed, or worked less than a total of 40 hours, for the 60 days before beginning the new job.
- The date of hire for the eligible employee must be from February 3, 2010 to January 1, 2011.
- For eligible hires employers may qualify for a 6.2 –percent payroll tax incentive on wages paid after March 18, 2010.
- For each eligible employee who workers at least a year employers can claim an additional general business tax credit of up to $1,000 per employee when they file 2011 tax returns.
The new law requires a signed statement from eligible employees confirming that they meet the requirement of having been unemployed for 60 days. The IRS will be putting together recommended forms for this purpose.
Employer tax credits that spur employment of the unemployed are terrific benefits but can be tricky to keep up with. They include strict deadlines for filing paperwork and providing information. Your payroll provider or an external consultant can be a great resource for this task and help identify if it is worth the effort. ADP has a handy calculator on line to show how the legislation can generate savings.
I’ll be back with more information when the IRS publishes forms. Check recent hires to see if anyone might qualify and create a checklist with the qualifications for these and future hires. A simple spreadsheet might be the beginning of a big tax savings opportunity.