2010 Hiring Incentives to Restore Employment (HIRE) Act
As you are likely aware, yesterday, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act that is designed to provide 18 billion dollars of job creation incentives for U.S. businesses.
In an effort to keep you up to date on this development, AdvanStaff will continue to post updates on our website and provide information though email newsletters.
AdvanStaff has worked closely with other PEOs (our industry) and Congressional leaders to assure that PEO clients are entitled to the retention credit authorized by The Hiring Incentives to Restore Employment (HIRE) Act (H.R. 2847). We will process these credits and tax reductions through our payroll system.
The HIRE Act offers qualified employers two incentives.
- A temporary payroll tax break for hiring qualified previously unemployed workers. These benefits can lead up to a maximum of $6,621 in FICA/Social Security payroll tax credits per qualified employee.
- A business tax credit of up to $1000 per qualified employee for retaining qualified workers at least 52 weeks.
The payroll tax credits & breaks are delivered to eligible & qualified employers who follow specific guidelines. For now, we envision the tax break rebates to be issued quarterly, but that may change with further clarification. Once the IRS releases final guidelines, AdvanStaff HR will update its payroll system to support these changes and quickly communicate this information to all clients. Keep in mind, this bill was passed just on March 18, 2010.
Following is information on what we know so far.
In order to be a “qualified employee,” the employee:
- Must start work after February 3, 2010 and before Jan 1, 2011.
- Must not have been an employee for more than 40 hours during the 60 days before his or her start date.
- Must not replace a current employee (unless that employee was separated from employment voluntarily or for cause).
- Must not be related to the employer or directly or indirectly own more than 50% of the business.
- May be previously laid-off employees. May be part-time or less than full time employees.
On the tax forgiveness program
What is the Payroll Tax Forgiveness Provision?
Answer: The 6.2% OASDI Social Security tax liability is lifted for “qualified employees” for any 2010 period starting after enactment of the legislation. (Note: Payroll tax forgiveness is coordinated with the Work Opportunity Tax Credit (WOTC). “Wages” for WOTC does not include any amount paid or incurred during the one year period starting on the hiring date unless the qualifying employer makes an election not to have payroll forgiveness apply.)
When does it start for a “qualified employee”?
Answer: The payroll tax forgiveness does not apply to wages paid in the first quarter of 2010. Any amount that would have been allowed in the first quarter would be credited against the employer’s OASDI liability for the second quarter. Beginning for new hire wages paid beginning April 1, 2010, the employer would take the OASDI forgiveness into account for regularly deposited payroll taxes.
Is there a maximum amount?
Answer: Yes. Based on a FICA wage cap of $106,800, the maximum value of this incentive would be $6,621 per “qualified employee.”
On the Tax Credit program:
What is the maximum amount of the credit?
Answer: With respect to each qualified retained worker is the lesser of $1,000 or 6.2% of the wages paid to the worker during the 52 week period.
How is the credit taken?
Answer: The credit is a Section 38(b) business tax credit. The tax credit will be available to most employers on the 2011 income tax return. (Note: the HIRE Act does not allow carry back of any unused Section 38 business credit that is attributable to the provision for retained workers.)
Are there limitations on the credit?
Answer: Yes. The new worker must be employed 52 consecutive weeks. A prorated credit for a shorter period is not allowed. Workers eligible for a “foreign earned income exclusion” are not eligible.
We will certainly provide more details on what to expect and on how to claim the incentives in the near future.