The Hiring Incentives to Restore Employment, or HIRE, Act, was recently signed by President Obama after being approved by the Senate by a 68-29 bipartisan vote on Wednesday, March 17th. It is the first of a series of bills that the administration and Congress plan to introduce to reduce the unemployment rate.
Some key points are listed below:
The new payroll tax exemption will provide employers with incentives to hire and retain new employees.The bill provides businesses, including small businesses, with an exemption from Social Security payroll taxes for every worker hired in 2010 who has been unemployed for at least 60 days. The maximum value of this incentive is $6,621, which equals 6.2 percent of wages paid in 2010, up to the FICA wage cap of $106,800. The longer that a business has a new qualified worker on its payroll, the greater the tax benefit.
The Act provides an additional $1,000 income tax credit for every new employee retained for 52 weeks. For small businesses, the bill extends Recovery Act provisions that double the amount small businesses can immediately write off their taxes for capital investments and purchases of new equipment made in 2010 from $125,000 to $250,000.
The bill expands the Build America Bonds direct payment option to include the issuers of qualified school construction bonds, qualified zone academy bonds, clean renewable energy bonds and qualified energy conservation bonds.
To qualify for the hiring tax credit, 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.
Feel free to contact our Tax Planning & Preparation Group at 440-449-6800 with any questions you may have about the HIRE Act.