Which employees qualify for the HIRE Act?
Written by: Jessica Dorsett, CPA
Congress passed the HIRE Act into law March 2010. This is a credit of 6.2% of the qualifying social security wages (essentially the employer’s portion of the tax) for the remainder of 2010 on qualifying new employees. If a payroll company prepares your payroll, please check with them to make sure you have all the information they need.
If you prepare payroll in house, be careful, there are some changes to the quarterly form 940 as well as the payroll deposits.
Here are the criteria for qualifying new employees:
- The employee must be hired after February 3, 2010, and prior to January 1, 2011;
- The employee has been out of work for at least 60 days prior to being hired (and did not work more than 40 hours during those 60 days);
- The employee cannot be related to the employer;
- The employee is not hired to replace another employee unless the former employee quit or was let go for cause (basically you can’t fire everyone just to hire new people to take advantage of the credit)
If you retain the employee for at least 52 weeks, you may also be eligible for up to $1,000 as a general business tax credit.
It’s worth noting that the employee does not have to be a full time employee. Part time employees and seasonal employees qualify. If you hire for the summer busy season or you are a farmer who hires for the harvest, those employees may qualify if they meet the four criteria listed above.
As always, see a professional if you have any questions.
Written by JessicaDorsett
I am a CPA with Polito Eppich Associates, LLP, a public accounting firm in Vista, California. Our principal focus is with closely held companies and their owners, but we also serve private investors, non profits and other high net worth individuals. Our primary market is San Diego County and surrounding counties, however, we have clients in LA and as far north as Bakersfield and San Francisco.
I graduated from the University of San Diego with a bachelors in accountancy. My primary focus with the firm is running the audit department. However, I enjoy doing tax returns to mix it up!
Lorrie Collins
30 Jun, 2010
ATTN: Tax Mama or Jessica Dorsett
Your article on tax mama state part of qualification is hire “before February 3, 2010″ – looking online @ IRS.gov and on the Form W-11 it states employment must began “…after February 3 2010…”. Can you clarify for me. I have a batch of new hires that qualify, however, (2) of my employees began on Feb 2 and Feb 3. I’m assuming that they would not qualify (I’m sick!!!)Why such as arbitrary date of “February 3″? Thanks for your clarification.
Jessica Dorsett
15 Jul, 2010
I appologize for the delayed response. It should read “AFTER February 3, 2010″. I will correct the typo. Sorry for the confusion.
admin
15 Jul, 2010
Jessica, since the article is published I don’t think the system will allow you to make edits. I’ve updated the article for you. Let me know if I missed anything.
Andrew Smith
http://www.taxqueries.com