Hire Act Of 2010

Apr 14, 2010

Have you heard the latest in tax incentives for businesses?  About a month ago, President Obama signed into law the HIRE Act.  This new legislation allows employers hiring for new positions or replacements, for voluntary terminations or terminations with cause, to take a 6.2% tax credit on their employer taxes in 2010.  Following the 2010 tax benefit, in 2011 the employer can take a $1000/employee credit on their tax returns for all employees still employed after a year.


So what are the mechanics?  From everything I have been able to garner here are some points to follow…


1.                  The tax incentive is for all employees hired after March 18th – the date the bill was signed into law.  Some have suggested this law applies to all employees hired after the introduction of the tax bill – Feb 3rd – but only applies to wages paid from the March 18th date forward. 

2.                  The tax incentive is for all hires whether the position pays $40,000 per year or pays $100,000 per year.  The 6.2% applies to both wage rates equally.

3.                  For the hiring to qualify, the employee must fill out an affidavit (Form W-11) stating he or she have not been employed for the past 60 days, or have been part time looking for full time employment for the last 60 days.

4.                  The employee can be replacing another employee who performed the same job only if the prior employee voluntarily quit or was terminated with cause.

5.                  The tax credit generally applies to the private sector – including non-profits – but does not extend to the public sector.

6.                  The tax credit will be reported starting in Q2 of 2011 (retro to hire date of March 18th) on form 941 as a new line item credit.

7.                  If the employee is still employed after 52 weeks, the employer would be eligible for a $1,000 tax credit to be taken on the 2011 tax returns.


The great part of this tax incentive is that it has an immediate effect on cash flow because the 6.2% is never remitted to the government in your payroll tax deposits.  The tax credit can be as high as $6,621 if the employee hits the new FICA limit for 2010 of $106,800 in wages.  Let’s face it, if we continue to see improvements in the economy and a business is hiring even 5 new employees at $45,000 per year, the savings for the company would equal around $14,000 for the year.  Not maybe the boon of the century, but as my dad used to say, better than a poke with a stick.


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