HIRE Act to Benefit Employers

To help jumpstart business hiring and investment, Congress has passed, and President Obama has signed, the Hiring Incentives to Restore Employment (HIRE) Act. The HIRE Act provides for payroll tax forgiveness and an employer income tax credit of up to $1,000 for qualified new hires. The payroll tax forgiveness is significant as for the first time the hiring of formerly unemployed workers will benefit businesses regardless of their profitability. The payroll tax forgiveness can benefit EVERY business and most nonprofits. The HIRE Act also extends enhanced Code Sec. 179 small business expensing to the 2010 year.

Hiring incentives. The HIRE Act provides qualified employers with temporary payroll tax forgiveness of the employer’s 6.2 percent share of Social Security payroll taxes on wages paid to new hires who had been previously unemployed. Payroll tax forgiveness is effective for qualified employees on wages earned for work after March 18, 2010 and on or before December 31, 2010. A qualified employee must begin work any time after February 3, 2010 and before January 1, 2011. The newly hired worker must not have been employed for more than 40 hours during the 60-day period ending on the date that the individual begins employment. The rehiring of former employees is eligible for this hiring incentive, as long as they have been unemployed for the 60-day period. Therefore, recalling laid off workers can qualify.

Full time and part time employees both qualify and there is no age requirement for the new hires.

Hired workers will be required to sign an affidavit certifying that they have not been employed for more than 40 hours during the 60-day period they were unemployed. The IRS is working on a “model affidavit” language eligible hires will be required to sign.

Retained worker business credit. Under the HIRE Act, employers that hire new workers who qualify for payroll tax forgiveness may also be eligible for an income tax credit for each qualified employee. For the employer to be entitled to this new credit, the qualified employee must be retained on the employer’s payroll for 52 consecutive weeks. The business credit under Code Sec. 38 will be increased, with respect to each qualified retained worker, by the lesser of $1,000 or 6.2 percent of wages paid by the taxpayer to the qualified retained worker during the 52 week period.

The hiring incentive and retained worker business credit can provide a significant tax break for hiring or rehiring individuals who meet the 60-day unemployment period.

Expensing. The HIRE Act raises the Code Sec. 179 small business expensing dollar limit for 2010 to $250,000 and the cap to $800,000 (the same amounts in place in 2009). The HIRE Act also provides that off-the-shelf computer software, a popular business purchase, is Code Sec. 179 property.

Please see the attached Question and Answer form for additional information on the HIRE Act.

Also, please contact your accountant if you have any questions regarding the HIRE Act and how it can help your business.

File: IRS HIRE Act QA.pdf