President Obama signed the Hire Act on March 18, 2010 to provide incentives for restoring Employment. This Act has two parts:
Part 1 – The tax Holiday which runs from March 19, 2010 – December 31, 2010 to relieve the employer’s share of Social Security tax on wages for new hires that have been unemployed for at least 60 days. This applies to any employee hired beginning February 4, 2010 through December 31, 2010. These employees must provide a signed affidavit to the employer of proof of their term of unemployment.
While the employer share of Social Security relief begins March 19, 2010, the IRS is not yet prepared to handle receipt of the employee only portion of the tax until 2nd quarter. Therefore, employers are required to continue to pay both the employee and employer portions of Social Security through the 1st quarter and then file for a credit in the 2nd quarter for the employer share from March 19, 2010 – March 31, 2010.
Part 2 –For employers who have hired those as described above, who remain employed for at least 52 weeks, the business tax credit is up to $1,000 per qualified employee. The business tax credit is calculated by comparing 6.2% of the employee’s taxable wages to the $1,000 limit. The employer may claim the lesser of the two.
Additional information to consider on the Hire Act:
- For an employee to qualify as unemployed for at least 60 days, the new hire cannot:
- be replacing another employee unless that employee quits or is terminated with cause
- be related to the employer
- be replacing a laid-off employee
- An employer cannot claim both the Work Opportunity Tax Credit (WOTC) and the tax holiday on one individual
- The employer may opt out and does not have to take part in the Hire Act.