Many organizations have been in a “wait and see” mode for hiring employees since the economic downturn of late 2008. For those businesses who think it might be time to open the doors for hiring new employees, this is good news!
According to the IRS, a new tax benefit went into effect March 18, 2010 for employers who hire underemployed (part-time) or unemployed workers. This is part of the Hiring Incentives to Restore Employment (HIRE) Act.
The tax benefit is for employers who hire underemployed or unemployed workers between February 3, 2010 and January 1, 2011. Under the act, these employers may be eligible for a 6.2 percent payroll tax incentive. The incentive exempts employers from the employer share of Social Security tax on wages for employees after the effective date.
Employee social security benefits will not be affected by this tax incentive. Employers will continue to withhold 6.2% of the employee’s share of social security taxes. An added bonus will be an additional $1000 tax credit, per employee, for those employers who retain those workers for at least one year. This tax benefit will be available on the 2011 tax returns.
“These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead,” said IRS Commissioner Doug Shulman.
Details of the Act:
- Filling existing open positions may qualify if the position was vacated or the worker left for cause.
- Benefits will be helpful to employers who add new jobs to their payroll.
- Employees will need to provide a certified statement that they were unemployed during the 60 day period before beginning the job. Or that they worked less than 40 hours during the 60 day period.
- Universities, public colleges, tax-exempt organizations, agricultural employers as well as businesses can all claim the tax benefit for eligible newly hired employees.
- Household employers are not eligible for this new tax benefit.
- When employers file their federal employment tax return, they will be able to claim the payroll tax benefit.
- New tax forms will be available for 2010 2nd quarter. These revised forms and eligibility details can be found on the IRS website irs.gov in the coming weeks.
This tax benefit may not be for everyone but for any organization who has been contemplating hiring new employees in 2010, this may be the perfect time.
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