by John Allen
On March 18, 2010, President Obama signed the new Hiring Incentives to Restore Employment Act (HIRE) into law. This federal legislation creates brand-new tax breaks for hiring and retaining unemployed workers.
Here’s a quick CCG overview on this job creation tax break.
Employers Get a Payroll Tax Holiday for New Hires — Plus a Potential Tax Credit Bonus.
Normally, an employer is required to pay its share of Social Security taxes on wages earned by employees. For 2010, the portion of the tax is 6.2 percent on the first $106,800 of wages.
Under the HIRE Act, an employer is effectively excused from paying its share of the 6.2 percent tax on wages received by “qualified employees.” This exemption applies to wages paid after the date of enactment through the end of 2010. The maximum value for each qualified employee is $6,621.
Example: If a qualified employee is hired in March and receives $50,000 in wages in 2010, the employer saves $3,100 (6.2 percent of $50,000) in Social Security tax.
The new law defines a “qualified employee” as someone who meets all of these criteria:
- Begins work after February 3, 2010 and before January 1, 2011.
- Has not been employed for more than 40 hours during the previous 60 days (ending on the start date).
- Was not hired to replace another employee unless the former employee separated from employment voluntarily or for cause.
- Is not related to the employer and does not own more than 50 percent of the business, either directly or indirectly.
Notes: A qualified employee may be either a full-time employee or a part-time employee. There is no minimum requirement for the hours worked. The payroll tax forgiveness does not apply to the 1.45 percent Medicare portion of payroll tax.
The exemption officially begins with wages paid in the second calendar quarter of 2010. Employers entitled to tax relief for the first quarter will be credited against their general Social Security liability for the second quarter.
Another tax credit bonus: In addition to the payroll tax forgiveness, an employer can claim a tax credit if it retains a qualified worker for a minimum of 52 consecutive weeks. The credit is equal to the lesser of: $1,000 or 6.2 percent of the employee’s wages paid during the 52-week period. If the employee quits or is fired before the end of the one-year period, no credit is allowed.
The new law requires that employers get statements 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 period. The IRS is currently developing a form employees can use to make the required statement.
HireVeterans.com and CCG have partnered to provide employers with a customized form that the employer will be able to use to claim this lucrative goverment program. Clearly, the sooner you create the job, the higher the financial benefit rewarded by the government.
Article Source: http://www.veteranstoday.com/2010/03/25/new-law-gives-huge-tax-breaks-to-companies-who-hire-veterans/
{ 1 comment… read it below or add one }
I admit, I have not been on this webpage in a long time… however it was another joy to see It is such an important topic and ignored by so many, even professionals. I thank you to help making people more aware of possible issues.
{ 1 trackback }