Hiring Incentives to Restore Employment (HIRE) Act
Newly signed "jobs bill" provides tax breaks to companies that hire unemployed workers

On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act, which contains more than $17 Billion in tax credits aimed to stimulate employment, and includes $20 Billion for highway and transit infrastructure programs.  One of the most important provisions for businesses is a tax credit for hiring from the ranks of the unemployed.  Under the HIRE Act, the employer of a “qualified employee” is excused from paying the employer match for the 6.2% Social Security portion of that employee’s wages in 2010.

A qualifying employee is one who:

• Is hired after Feb. 3, 2010 and before Jan. 1, 2011,
• Is hired to fill a newly created position. New hires filling existing positions qualify but only if the workers they are replacing left voluntarily or for cause.
• Is not related to the employer
• Certifies under penalty of perjury that he or she has not been employed for more than 40 hours during the 60-day period ending on the date that employment begins with the new employer. The IRS has developed a form employees can use to make the required statement. Employer Flexible is currently modifying your new hire packet to include this form.

This incentive can save the employer up to $6,621.60 for each qualified employee hired (6.2% of the maximum Social Security withholding for 2010), with increased savings for hiring qualified veterans, whose maximum Social Security withholding amount is higher.  Employers also can receive a tax credit on their 2011 return for each new employee hired and retained for 52 weeks under certain criteria; that credit is the lesser of $1,000 or 6.2% of the wages paid to the employee for those 52 weeks.

GUIDANCE ON THE WAY - The IRS is expected to issue guidance quickly on the many tax depositing and reporting issues created by the Act. The American Payroll Association (APA), along with representatives of the service provider community, has been working with the Service for the past few weeks to make implementation as smooth as possible for employers.  Employer Flexible will keep abreast of the reporting guidelines and issues surrounding this Act.

These tax incentives are meant to spur job creation, especially for small businesses who are undecided about whether to begin to ramp up company-building efforts in light of recent economic difficulties.  In addition, the Act includes a one-year extension of expensing thresholds so that small businesses may elect to write-off up to $250,000 of certain capital expenditures (subject to a phase-out once those expenditures exceed $800,000) in 2010 in lieu of depreciating those costs over time. The goal of that provision is, of course, to provide an incentive to businesses to invest immediately in equipment and inventory to jump-start economic activity. Please consult your tax specialist about this new provision.

Congressional leadership has called the HIRE Act the “first of several” laws intended to stimulate job creation. Employers should make themselves aware of the opportunities that are becoming codified in new laws, and should maximize on those opportunities for employing and re-employing qualified individuals. However, employers also must recognize that these new laws do not excuse employers from complying with existing anti-discrimination laws, and should be aware that increased hiring may also call for increased diligence in compliance with those laws.

If you have any questions regarding this or any HR related issue, please contact your HR Consultant or email the HR Department at hr@employerflexible.com.