Get Up To Speed On The HIRE Act

The Hiring Incentives to Restore Employment Act (“HIRE Act”) offers an exemption from Social Security payroll taxes for every new qualified employee. The maximum value of the credit is equal to 6.2% of wages up to $106,800. There is also an additional $1,000 income tax credit for every new employee retained for 52 weeks who earns at least $16,129. The credit is reduced to 6.2% of income for employees who earn less. To qualify for the credit, which will be taken on the employer’s 2011 income tax return, an employer must pay the new worker during the second half of the 52 week period at least 80 percent of what the employee was paid during the first half of the year.

The HIRE Act defines a “qualified employee” as someone who meets ALL of these criteria: 1. Begins work after February 3, 2010 and before January 1, 2011. 2. Has not been employed for more than 40 hours during the previous 60 days. 3. Was not hired to replace another employee unless the former employee separated from employment voluntarily or for cause. 4. Is not related to the employer and does not own more than 50% of the business either directly or indirectly. 5. Can provide a signed statement to certify that he/ she was unemployed for at least 60 days prior to being hired or had worked only part time for 60 days. The IRS is now preparing a form for this eligibility statement.

A qualified employee may be either a full-time employee or a part-time employee. There is no minimum requirement for the hours worked. Employees must pay their own Social Security tax, which is also 6.2% of their pay. The payroll tax forgiveness does not apply to the 1.45% Medicare portion of the payroll tax.

In addition, The HIRE Act extends Code Section 179 expensing of equipment and furniture up to $250,000 phased out if your expenditures top $800,000, through December 2010. It also provides funding for highway and transit programs in 2010 and expands the Build America Bonds program, which funds state and municipal capital construction projects.