By James A. Woehlke, Esq., CPA, MBL Benefits Consulting COO/General Counsel
On March 18, President Obama signed the Hiring Incentives to Restore Employment Act (“HIRE”), the greatly slimmed-down jobs bill presented him by Congress. With a price tag of $17.6 Billion, the centerpieces of the bill are (1) a social security tax “holiday” for employers that hire people who have been employed 40 hours or less in the 60 days preceding the hire date and (2) a business tax credit for continuing qualified employees’ employment beyond 52 weeks.
The provision exempts employers from the 6.2% employer-portion of social security tax on wages paid to the employee between March 19 and December 31, 2010. (The 1.45% employer match on Medicare tax is unaffected by the Social Security Tax holiday.) If the employment is maintained for 52 weeks, there is an additional benefit, a business tax credit of 6.2% of the wages paid during the 52-week period up to a maximum credit of $1,000. To take advantage of these benefits, the employer must choose not to apply for the Work Opportunity Tax Credit on the affected employees. Because the WOTC can result in a higher tax benefit, however, the employer may prefer to opt out of the HIRE benefits. Be sure to consult your CPA or attorney regarding which is more beneficial.
To qualify, the employee must have begun work after February 3, 2010, and before January 1, 2011, and must certify under penalties of perjury that he or she had not worked over 40 hours in the 60 days preceding the date of employment. The employee cannot replace a former employee unless that employee left freely or was fired for cause. The credit may be applied for re-hired employees who otherwise meet the requirements. Finally, family member/employees will not qualify.
For additional information on the HIRE benefits, see “HIRE Act Signed Into Law- What It Means to Employers” and “Breaking news from Capitol Hill from Grant Thornton’s National Tax Office, 2010-05.”