Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part-time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law by President Obama on Mar. 18.
Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2% payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after Mar. 18, 2010.
This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2% share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.
In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.
The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.
In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.
Businesses, agricultural employers, tax-exempt organizations, and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly hired employees. Household employers cannot claim this new tax benefit.
Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010.
Revised forms and further details on these two new tax provisions will be posted on IRS.gov during the next few weeks.
RichardL. Lipton CPA & Associates LLC, located in Florham Park, N.J.,draws on its founder’s 10 years as a stockholder and manager offamily-owned Sam’s Tire Co. in Paterson, N.J.
RichardL. Lipton CPA & Associates LLC “is structured to personally servelarge and small clients who have a need for business consultingservices as well as accounting and tax services. We have even developeda niche in the area of forensic accounting. Our clients have realizedthat this combination of skills is extremely valuable in providing thehighest quality professional services in today’s and the future’seconomy.” – Richard L. Lipton CPA
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