New HIRE Act

Me Time

5 Tips on Creating Jobs with the New HIRE Act

Are you an HR professional or overworked manager struggling with a hiring freeze? A business owner looking to expand? A new staff member may be just what you need – and the federal government will help pay for it.

The Hiring Incentives to Restore Employment (HIRE) Act contains more than $17 billion in tax credits designed to stimulate employment. Get your share – and help the economy at the same time.

The new legislation, enacted on March 18, 2010, offers substantial benefits to employers who create jobs for unemployed workers. There are immediate savings for employers (payroll tax exemption) and also longer-term advantages (business credit for retention). Employers can save an estimated $6,000 per employee in payroll taxes, and another $1,000 per worker in tax credits.

Most businesses and not-for-profits are eligible under the new legislation, although domestic workers are specifically excluded. As always, consult a tax professional for your specific situation.

Here are the high points of the new Act and an overview of how it can benefit your business:

Tax forgiveness: By giving a job to a previously unemployed person, a business can save the 6.2 percent Social Security tax (employer’s share) on the worker’s pay for the rest of this year (up to December 31, 2010).

Retention credit: An employer can also receive tax credits for keeping new workers at least 52 consecutive weeks. Each credit equals the lesser of $1,000 or 6.2 percent of the employee's wages paid during the 52-week period. Hire retention credits will be claimed on the employer’s 2011 income tax return.

The new job must really be “new” – not a replacement for an existing position.

The new employee must have been unemployed or have worked no more than 40 hours in the previous 60 days. The IRS has just released a draft of the HIRE Act Employee Affidavit (Form W-11), which certifies worker eligibility.

One caveat for family businesses: New hires cannot be related to the business owner.

The IRS website offers a summary and FAQs on the new legislation. Click here for more information: http://www.irs.gov/businesses/small/article/0,,id=220745,00.html.