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Hiring Incentives to
Restore Employment (HIRE) is now official

On Thursday, March 18, 2010, President Obama signed the HIRE (Hiring Incentives to Restore Employment) Act into law. HIRE includes two new tax benefits available to employers hiring workers who were previously unemployed or only working part time.

The first new tax benefit allows employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) to qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

The second benefit allows businesses to claim as part of their 2011 income tax returns an additional general business tax credit—up to $1,000 for each worker who is retained for at least a year.

The new law requires that employers get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.

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 this new tax benefit.

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 on these two new tax provisions will be posted on IRS.gov during the next few weeks.