The Enactment of the HIRE Act on March 19, 2010 provided employers hiring the unemployed with much needed tax breaks. Employers are eligible for tax credit under the following conditions:

a. Hired a certified employee who has not worked for a total of 40 hours prior to the 60-day period he/she was to begin work. The employee must sign an affidavit under penalty of perjury to the effect mentioned above.

b. The 6.2% Employer Social Security Tax exemption and the tax retention credit will neither be applied to employers who replace an employee with another one unless the employee being replaced was let go for cause or voluntarily left the company. Also, you can not fire employees and then re-hire them to be able to benefit from the Act.

c. The 2010 earned wages of employees hired after March 18, 2010 to January 1, 2011 must not exceed $106,800 to be able to benefit from the tax breaks.

The Internal Revenue Service has released a revised form to help employers claim their tax breaks. The form and instructions can be found at www.irs.gov/pub/irs-pdf/f8846.pdf The benefit has no cap exemption, so the earlier you hire the better tax savings for your company. Employers can save as much as $6,600 per qualified employee under the scheme, and will only be available for all wages paid until December 31, 2010.

The 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.

Further details on both the tax credit and the payroll tax exemption can be found in a recently-expanded list of answers to frequently-asked questions about the HIRE Act.

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