Napier & Company, LCC

Hire Act (The Hiring Incentives to Restore Employment Act)

Last month, President Obama signed the Hiring Incentives to Restore Employment Act (HIRE) into law in response to the ongoing high unemployment rate. The act has immediate ramifications for businesses of all sizes. Given this, we are providing you with this enews to help educate our clients and professional contacts.

The HIRE Act provides incentives to businesses for giving jobs to out of work Americans by exempting “qualified” employers from paying the employer’s share of Social Security (FICA) taxes. That’s an immediate savings of 6.2% of wages paid. Note that this is the Social Security tax only, not the Medicare taxes. Employers will claim the tax benefit on their quarterly Form 941 payroll reports. The incentives apply to wages earned between Feb. 3, 2010 and Jan. 1, 2011. So, the earlier you hire a new employee, the more your business will save.

What is a “qualified” employer? Well, it is a pretty broad definition. Any non-government employer is considered a “qualified” employer. This means all businesses, large, medium and small (including agricultural businesses, not-for-profits, and public colleges and universities) can take advantage of the savings. Even if you start your business in 2010, you are still a “qualified employer.”
This payroll tax exemption applies to new hires that have not worked more than 40 hours during the previous 60 days. This includes new employees that had been laid off . Newly hired employees will need to certify that they have not been employed for more than 40 hours during the past 60 days before they begin working for the qualified employer. To do this, have the employee fill out Form W-11, HIRE Act Employee Affidavit, which is available on the IRS website (www.irs.gov/pub/irs-pdf/fw11.pdf).

Since the law was designed to stimulate job growth, businesses do not qualify for the exemption if you hire a new employee to replace an existing one. However, there are two exceptions to this:

• The existing worker terminated his/her employment voluntarily or

• Was fired for cause.

Another part of the legislation provides a tax credit to encourage retention of these new hires. Employers may claim a tax credit of up to $1,000 for each worker that was hired under the act that continues to be an employee for 52 consecutive weeks. The employee’s pay needs to not decrease significantly during the second half of the 52 week period. The credit will be claimed on the employer’s 2011 income tax return.

A third provision of the new law may affect your businesses, but have no bearing on your employees. This provision extends the enhanced Section 179 deductions of 2008 and 2009 into 2010. Businesses can continue writing off up to $250,000 of qualified property (and that’s most property used in the United States for business except land and buildings) subject to a phase-out if the business has capital expenditures exceeding $800,000.

Please call us if you have any questions about how you can benefit from the HIRE Act.