Hiring Incentives to Restore Employment (HIRE) Act

The HIRE Act was created to encourage job creation and employee retention at these jobs by providing tax breaks for businesses.  The HIRE Act was passed on March 18, 2010 and is effective for employees hired between February 3, 2010 and before January 1, 2011.  The HIRE Act encourages the hiring of individuals that were unemployed during the 60 days before beginning work or worked fewer than 40 hours total during the 60 days preceding hiring.  Employers should have new hire employees fill out IRS form W-11 to certify that they are qualified employees.

There are two separate components of the HIRE Act tax breaks that are relevant to employers for each qualified employee. They are:
1)   Exempting the employer from the 6.2% of the employer's share of social security taxes on wages paid after March 18, 2010.  This will not affect the employee's social security benefits and the employee's share of social security, medicare, and income taxes should still be withheld.  In addition, the employer's share of medicare taxes would still apply.  As long as the qualified employee is still employed, this exemption lasts through December 31, 2010.
2)  A new hire retention credit.  Qualified employees (as defined above) that are hired and retained for a consecutive 52 week period can potentially qualify the employer for up to a $1,000 general business tax credit on their 2011 tax return.  The credit is the lesser of $1,000 or 6.2% of the wages paid to the qualified employee during the 52 week period/