What Tax Credits Are Available to Businesses under the Jobs Bill (2010 HIRE Act)

Question: What Tax Credits Are Available to Businesses under the Jobs Bill (2010 HIRE Act)

HIRE Act tax credits were only available through December 31, 2010. Incentives are not available for hiring employees in 2011 or beyond.

Answer:

The Jobs Bill (HIRE Act) was signed into law by President Barak Obama on March 18, 2010 to stimulate hiring of unemployed workers by businesses. The Jobs Bill includes tax credits for employers.

Jobs Bill Tax Credits for Employers

Social Security Tax Credit
You can save on Social Security taxes by hiring qualified workers this year. If you hire qualified workers between February 2, 2010 and December 31, 2010, your business is eligible for a credit for the employer portion of Social Security taxes (6.2%) (part of FICA taxes). The employee portion of the Social Security tax must still be deducted from employee pay, and you still must pay the Medicare tax portion of FICA taxes and deduct Medicare taxes from employees.

Restrictions and qualifications include:

• The Social Security credit is for wages paid between March 19, 2010 and December 31, 2010 up to the $106,800 Social Security wage base.
  
• The qualified individual must begin employment with a qualified employer after February 3, 2010, but before January 1, 2011.
  
• The qualified worker must have not been employed for more than 40 hours during the previous 60 days, as attested to in an affidavit signed by the worker.
  
• The qualified worker cannot be hired to replace another employee, unless that employee left voluntarily or for cause. You can use the credit to rehire a previously laid off worker.
  
• Family members of the business owner are not qualified for this tax credit.

In addition, note that the Social Security tax exemption cannot be taken in conjunction with the Work Opportunity Tax Credit (WOTC). If you are taking the WOTC on a worker, you can't take the Jobs Bill Social Security tax credit.

Tax Credit for Hiring and Retaining Workers
Your business may also file a claim for each qualified worker you hire after February 3, 2010, if the worker remains an employee for at least 52 consecutive weeks (a year). You can hire the worker full-time or part-time and still receive the credit, which is $1,000 or 6.2 percent of the wages paid to the worker during the 52 weeks, whichever is less. An additional restriction is that wages paid during the previous 26 weeks must equal at least 80% of wages during the first 26 weeks of employment. In other words, you can't reduce the employee's pay to save on wages.

Types of Workers Not Covered
These tax savings do not apply for hiring household workers, for workers eligible for foreign earned income exclusion, or for independent contractors.