By Wendy J. Baker - Oregon Employment Attorney
President Obama recently signed into law the Hiring Incentives to Restore Employment Act ("HIRE Act"). The Act creates tax breaks for private employers, including non-profits, who hire and retain new workers, whether full-time or part-time.
Key provisions of the Act include:
- An exemption from paying the employer's portion of Social Security payroll taxes for each worker hired in 2010 who previously had been unemployed for at least 60 days;
- A $1,000 income tax credit, or a credit of 6.2% of total wages paid, for each new employee hired in 2010 and retained for at least 52 weeks.
In order for the employer to be eligible for the tax exemption, the employee must be:
- Hired during the period from February 4, 2010 to December 31, 2020;
- Willing to sign an affidavit certifying that he or she has not been employed for a total of more than 40 hours during the 60-day period immediately preceding his or her date of hire;
- An addition to the employer's workforce and not hired as a replacement for another employee, unless the employee being replaced either voluntarily resigned or was terminated for cause; and
- Unrelated to the employer and not in ownership of more than 50 percent of the business.
If an employer hires an employee meeting these requirements, the employer will not be required to pay its portion of the 6.2% Social Security "FICA" tax from March 18, 2020 (the date of enactment of the HIRE Act) through December 31, 2010. Employers must pay all other payroll taxes. Employers gain an additional benefit under the HIRE Act if they retain the newly hired employees for a full 52 weeks: a business tax credit equal to the lesser amount of either 6.2% of the employee's wages or $1,000 per qualifying employee. To qualify, the employee's wages during the last 26 weeks of the period must equal at least 80 percent of the wages paid for the first 26 weeks. The IRS is in the process of issuing guidance and draft forms to help employers process this exemption, including a simple affidavit for eligible employees to sign.
Please feel free to contact me if you have questions about this.
