April 2010   

HIRING INCENTIVES TO RESTORE EMPLOYMENT
  (HIRE) ACT OF 2010
                                  By Barb Krout                              

           The president has recently signed into law the HIRE Act to help stimulate the hiring of workers by the private sector and also includes nonprofit organizations and public higher education institutions. For businesses that hire unemployed workers, the main focal points of this Act are the payroll tax holiday and a tax credit of 6.2% of the workers wages or $1,000, whichever is less, for workers employed continuously for 52 weeks. The Act also included a one-year extension of the enhanced small business expensing option under Code Sec. 179.

         The payroll tax holiday exempts any private-sector employer that hires a worker who had been previously unemployed for at least 60 days (employees will have to sign an affidavit confirming this – IRS Form W-11 is attached) from having to pay the employer’s share of the 6.2% Social Security payroll tax. This exemption stays in effect through the end of 2010. This could result in a maximum tax savings of $6,621 if the hired employee received the maximum amount of wages subject to the Social Security tax which is currently $106,800 for 2010 by the end of the year. This payroll tax forgiveness is for employees hired after February 3, 2010 (the date of the Act’s introduction into legislation), however only wages paid after March 18, 2010 are eligible to receive the actual exemption from the payroll tax.

        The up-to-$1,000 tax credit for businesses can also save the employer even more money. This credit is for an employer who hires a qualifying worker and keeps them on payroll for a continuous 52 week period. The employer then becomes eligible for a tax credit of 6.2% of the employees wage or $1,000 whichever is less after the 52 weeks have been met. It will be taken on their 2011 tax return. The main stipulation for this employee retention incentive is that the employees wages earned in the second 26-week period must be at least 80% of their wages earned in the first 26-week period. Also, similar to the payroll tax holiday, only employees who were hired after February 3, 2010 are eligible for this retention bonus given to the employers.

         The extension for the enhanced small business expensing part of the Act increases the dollar limits for deducting the cost of business machinery and equipment, instead of depreciating it over a number of years, to the same limits that were in effect for 2008 and 2009. Prior to this Act the limit would have fallen from the $250,000 maximum amount a business could expense to $134,000. The phase out for the expensing election would have fallen from $800,000 currently to $530,000 also prior to the Act.

         This Act currently is looking to help the employer try to keep money in their pockets and like any other Act, it has some requirements that must be met. Call our office today to discuss these incentives to make sure you are meeting the requirements and taking advantage of the incentives.