Hiring Incentives to Restore Employment Act
The Hiring Incentives to Restore Employment (HIRE) Act was signed into law on March 18, 2010. The act provides two tax benefits to employers who hire certain previously unemployed workers who meet certain requirments.
The HIRE Act enables employers who hire unemployed workers after February 3, 2010 and before Jan. 1, 2011 to (with certain exceptions) qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security tax on wages paid to these workers after March 18, 2010. The reduced tax withholding will have no effect on the employee's future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.
In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.
- New hires filling new or existing positions qualify but only if the workers they are replacing left voluntarily or for cause.
- Family members and other relatives do not qualify.
- The employer must get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period.
What employers can qualify for HIRE benefits
Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees.
What employers can not qualify
Household employers cannot claim this new tax benefit.
How to claim the benefit
Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. The payroll tax exemption is claimed on Form 941, Employer's Quarterly Federal Tax Return, beginning with the second quarter of 2010.
- IRS.gov - Press release, March 18, 2010, "Two New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers"