Why it Might Be Time to Hire in 2010

The Federal government wants to give business credit – a tax credit, that is, for hiring in 2010. The new Hiring Incentive to Restore Employment, otherwise known as the HIRE Act, will provide a couple of new benefits for employers who choose to fatten their employee roster this year. They do have to meet a few conditions, and there is a ceiling to the tax benefit, but it will definitely be worth reviewing for those businesses that are expanding their payroll.

Hire the Unemployed

First off, the credit will only be given to companies that hire someone who has worked 40 hours or less in the prior 60 days before they were hired by the new company. This is to target the unemployed and get them back to work. The government will require that the new employee sign an affidavit stating that they meet the criteria before a company can claim the credit.

What Business Gets in Return

First off, the qualifying business will receive a reduction on the portion of Social Security taxes that they must pay for the employee. This will max out at 6.2% of the employee’s wages and can only be estimated for wages received between March 18 to December 31st, 2010. This reduction will show up as a credit on Form 941.

Secondly, they get another credit that will directly offset the company’s tax liability for 2011. To get this credit, the employee has to be hired after February 3rd and before December 31st, 2010. The employee must also work a continuous 52 weeks. This credit is limited to either $1,000 or 6.2% of the employee’s wages, whichever happens to be less.

Stay Tuned

As the details of the program are ironed out with the IRS, the required forms will become available. Until then, keep your ears tuned for how these new credits can help you fund new hires and provide you with a little tax relief too.