New Hiring Incentives for Employers
President Obama recently signed the $17 billion Hiring Incentives to Restore Employment (HIRE) Act. The act is part of the economic stimulus effort to encourage businesses to hire more employees. We wanted to make you aware of some of the incredible benefits for which employers may be eligible.
The following are some key points to be aware of:
- Social Security Taxes: Employers will not have to pay this tax — which amounts to 6.2% of wages up to $106,800 — for hiring someone after February 3, 2010 and before January 1, 2011. To qualify, the employer will have to certify that each employee they hired was employed for no more than 40 hours in the 60-day period ending on the date that employment begins. This must be verified with a signed affidavit (pending further detail from the IRS). However, there will still need to be withholding for the employee's share of the Social Security tax (which is also 6.2%). The law change will have no impact on an employee's benefits.
- Business Tax Credit: For employees that qualify for the HIRE Act, there is an additional $1,000 income tax credit for new-hires that are retained for a minimum of 52 weeks. This credit applies if the wages paid in the last 26 weeks are at least 80% of what they were for the first 26 weeks.
- Business Expensing: The increased threshold Section 179 expensing has been extended for another year. IRS Section 179 allows a taxpayer to elect to deduct the cost of certain types of property on their income taxes, as an expense (rather than requiring the property to be capitalized and depreciated). This property is generally limited to tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business.
The aforementioned provisions are effective immediately. The HIRE Act provides that businesses will prepare their first quarter 941's as if the law was not in effect. Employers will claim any qualifying payroll tax relief earned in the first quarter as a credit on their second quarter 941. The $1,000 retained worker credit is earned only after the qualified worker has been employed for at least 52 weeks. Considering this, calendar year employers will claim the credit on their 2011 returns.
We here at Soren McAdam Christenson LLP would be happy to help you explore your eligibility for these new credits. Contact us today to find out more