$1,000 New HIRE Tax Credit

Posted on April 30, 2010. Filed under: Tax Tips | Tags: , , |

The Hiring Incentives to Restore Employment (HIRE) Act became law on March 18, 2010. Its purpose is to stimulate employers to hire more employees and, thus, reduce the unemployment rolls. It provides significant tax benefits to non-governmental employers in the form of a payroll tax exemption and up to a $1,000 tax credit for each qualified new hire.

How Do Employers Qualify?

The HIRE Act provides up to a $1,000 tax credit to employers who retain new hires for a 52 consecutive-week period.

How Do Employees Qualify?

The payroll tax exemption only applies to the wages of a newly hired individual who:

  • Was hired by the employer after February 3, 2010, and before January 1, 2011;
  • Has certified by signed affidavit, under penalty of perjury, that he/she has not been employed for more than 40 hours within the 60 days prior to the hire date;
  • Has not been hired to replace any current employee unless that current employee;
  • Separated from the employer’s service voluntarily, or was terminated for cause; and
  • Does not own more than 50 percent of the employer or is not related to, or otherwise affiliated with, anyone who is an owner.

How Much Can You Get?

The $1,000 is provided in the form of a tax credit. Whereas tax deductions only serve to reduce your taxable income (or give you a much smaller percentage of economic benefit), a tax credit will pay you the full amount.

The tax credit is limited to $1,000. The tax credits will be received when you file your 2011 Federal Income Tax Return.

Is the $1,000 tax credit limited?

Yes, to receive the full amount of the $1,000 credit, the new hire’s wages for the period must exceed around $16,000. If the wages are less than this amount, the credit received by the employer will be equal roughly 6% of the wages earned during the 52-week period. Furthermore, to qualify for the credit, the new hire’s pay for the second half of the 52-week period must be at least 80 percent of the pay provided in the first half.

Finally, employers who qualify for this payroll tax exemption cannot also earn the Work Opportunity Tax Credit.

Consult your tax professional to see how this can work for you!

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