The New HIRE Act and How It May Impact You

4/29/2010

By Ryan Pospeck, CPA

On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment Act into law. The HIRE Act, also known as the "jobs bill," is a plan to create jobs by providing a temporary tax break to companies that hire the unemployed. This federal program has been created to provide additional incentives for employers to hire and retain employees. The HIRE Act will exempt employers from paying the Social Security taxes for new employees hired from February 3, 2010, through the end of the year for people who have not been employed for more than 40 hours over the past 60 days.

For individuals hired during this period, 6.2% (the employers’ portion of the Social Security tax) will be exempt for wages between March 19, 2010, through December 31, 2010, up to the $106,800 wage base. If these employees remain on the payroll for at least one year, the employer would get an additional business tax credit of up to a $1,000 per employee.

A qualified individual meets the following requirements:

• Begins employment with a qualified employer after February 3, 2010, but before January 1, 2011.
• Has not been employed for more than 40 hours during the previous 60 days.
• The individual must sign an affidavit attesting to the employer that he was not employed in the previous 60 days, or was employed for no more than 40 hours total.
• Is not hired to replace another employee unless the previous employee was separated from employment voluntarily or for cause.
• Is not a family member of the business owner.

As a result of the act, an employer can save up to $6,622 in employer Social Security tax for each qualified employee hired. There is no limit to the total amount of tax benefits or hires during this period, and employers will generally receive greater tax benefits by hiring individuals earlier in the year.