The credit is the lesser of 6.2 percent of wages paid to that employee over the 52 week period or $1,000. Employers will get the most out of the tax credits by hiring qualified workers sooner, rather than later, as the tax credits will reduce over time until they are completely diminished on or before January 1, 2011.
QUALIFYING WORKERS AND BUSINESSES
1. Employees hired between February 3, 2010, and January 1, 2011.
2. A newly hired employee that was unemployed or worked fewer than a total of 40 hours during the 60 consecutive days prior to starting the job.
3. Agricultural employers, tax-exempt organizations, public colleges and universities as well as taxable businesses qualify to claim the benefits.
NON-QUALIFYING WORKERS AND BUSINESSES
1. Employees hired to replace an existing employee, unless the previous employee was terminated for cause or voluntary terminated employment.
2. Employees who are related to the employer.
3. Household employees.
4. Federal, state and local government employers.
CLAIMING TAX CREDITS
The HIRE Act requires that employers obtain a signed affidavit from each eligible new hire to certify that he or she was either unemployed or worked less than a total of 40 hours during the 60 days prior to being hired. To meet this requirement the Internal Revenue Service [IRS] released Form W-11 on April 7, 2010. Qualifying new hires should complete form W-11 upon employment, and the form is to be kept on file by the employer along with other payroll income tax records.
Employers will then use their 2011 income tax return to claim the new hire retention credit and Form 941, Employer's Quarterly Federal Tax Return, to claim the payroll tax exemption. An employer may claim the payroll tax exemption for wages paid to qualified employees during the first quarter [only wages paid from March 19 through March 31, 2010 are eligible] on Form 941 for the second quarter of 2010. The amount of credit claimed on Form 941 for the second quarter will be refunded to the employer or may be applied against a liability for a later quarter.
1. "Two New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers." IRS.gov. Internal Revenue Service. 18 Mar 2010. Web. 14 May 2010.
2. "FAQs About Claiming the Payroll Exemption." IRS.gov. Internal Revenue Service. May 2010.
3. "FAQs About Qualified Employees." IRS.gov. Internal Revenue Service. n.d. Web. 14 May 2010.
4. "FAQs About the Payroll Tax Exemption and Qualified Employers." IRS.gov. Internal Revenue Service. n.d. Web. 14 May 2010.
5. "2010 HIRE Act: Tax Breaks for Small Business." Hireact.org. n.d. Web. 14 May 2010.