Two New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers
The HIRE Act
Two new tax benefits are now available to employers hiring workers who were previously
unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore
Employment (HIRE) Act enacted in March.
Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011)
may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of
Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax
withholding will have no effect on the employee’s future Social Security benefits, and employers
would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as
income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these
wages.
In addition, for each worker retained for at least a year, businesses may claim an additional
general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.
"These tax breaks offer a much-needed boost to employers willing to expand their payrolls,
and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead,"
said IRS Commissioner Doug Shulman.
The two tax benefits are especially helpful to employers who are adding positions to their
payrolls. New hires filling existing positions also qualify but only if the workers they are
replacing left voluntarily or for cause. Family members and other relatives do not qualify. In
addition, 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.
Businesses, agricultural employers, tax-exempt organizations and public colleges and
universities all qualify to claim the payroll tax benefit for eligible newly-hired employees.
Household employers cannot claim this new tax benefit.
Employers claim the payroll tax benefit on the federal employment tax return they file,
usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on
their revised employment tax form for the second quarter of 2010. Revised forms and further details
on these two new tax provisions will be posted on IRS.gov during the next few weeks.
