Federal Hire Act

On March 19, 2010, President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act, which is focused on accelerating the hiring of unemployed workers.

The $17 billion HIRE Act has provisions that will provide employers with financial incentives for hiring unemployed workers and retaining those workers for at least one year.  Specifically, the bill contains two provisions that impact employers:  a Social Security "holiday" on FICA tax and a Business Tax Credit.  

Social Security Tax Exemption:  Under the HIRE Act, an employer would be exempt from paying its share of the FICA Social Security taxes on any new hire who has been without full-time employment for at least 60 days.

• The maximum tax break an employer could gain per employee under this provision would be $6,621, or 6.2% of total wages paid in 2010 up to the $106,800 FICA wage cap.
• Employers will withhold the employee's share (6.2%) of Social Security taxes as well as any other applicable taxes, however the exemption will not impact the employee's future Social Security benefits.
• Employers are required to get a statement from each eligible new hire certifying that he/she was unemployed during the previous 60 days OR worked fewer than 40 hours total for someone else during that 60-day period (the IRS is developing a form for employees to use to make this statement which I will forward to you when completed).

Business Tax Credit:  In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns. 

Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees.  Household employers cannot claim the new tax benefit.

Employers will claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS.  Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010.  Revised forms and further details will be posted as they become available over the next few weeks.

Please check with your accountant or payroll processing company on how this important legislation will impact your business.