Margaret Sheahan is the President of Mitchell and Sheahan, P.C of Stratford, CT.
We all pray that the economy is recovering from recent, disastrous blows. Some Spring 2010 federal legislation is designed to encourage action that might help make those hopes reality. The Hiring Incentives to Restore Employment (“HIRE”) Act is the clever name of the legislation signed by President Obama earlier this year to initiate these incentives. A pair of HIRE tax breaks can make adding to workforce in 2010 a little more palatable to the wary employer. One reprieves the employer’s share of the Social Security payroll tax for the lion’s share of the year for a qualifying hire, a savings of 6.2% of wages. This credit can apply to wages paid on or after March 19 through December 31, 2010. The other is a credit on the employer’s income taxes for 6.2% of a year’s wages (up to $1,000) paid to such a new hire who remains employed for at least 52 weeks without significant wage reduction in the second six months.
Qualified employers are non-domestic and non-governmental employers and governmental educational institutions. Conditions also apply to judge whether the hire itself is qualified and if the new hire is a qualified employee.
The hire must occur after February 3, and no later than December 31, 2010 and must be to a newly created position or to replace an employee who quit or was terminated for cause. If it meets these standards, a qualifying hire can be a rehire of a laid off employee or a hire by a newly started company.
The person hired must have been unemployed or employed for fewer than 40 hours per week for 60 days prior to the hire by the employer claiming the credit, and must not be a relative of the hiring employer or a 50% or more owner of the employing entity.
To qualify for the credits, the employer must obtain a signed statement from each qualifying hire stating that his or her employment circumstances in the 60 days prior to this hire meet the statutory standards. The IRS has issued a form W-11 for this purpose, and while its use is not mandatory, why risk making a mistake in your own draft? The employer is not required to submit the W-11s to the IRS but it is certainly advisable to keep them in a safe place in case it is ever necessary to justify the credits claimed. The trusty old Form 941 quarterly employment tax report has been amended once again to permit for the reporting of these credits. With its other recent face lift to permit for COBRA subsidy claims, the Form 941 instruction sheet is now 8 pages long!
Any employer adding to its employee ranks in 2010 should make sure not to leave available HIRE money on the table.
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