The HIRE Act

The Hiring Incentives to Restore Employment (HIRE) Act was signed into law on March 18, 2010. This new law provides tax benefits to employers who hire workers who were previously unemployed or working part time.

Hiring and payroll tax incentives

Employers who hire previously unemployed workers (after February 3, 2010 through the end of 2010) may qualify for a 6.2% payroll tax incentive. This incentive effectively exempts the employer from Social Security taxes on wages paid to these workers after March 18, 2010. Employers are still responsible for the Medicare tax and the employees are still responsible for income taxes as well as their share of Social Security taxes and Medicare taxes.

For each qualified newly hired worker, retained at least a year, the business may claim an additional non-refundable tax credit up to $1,000 per worker on their 2011 income tax return.

A few key details regarding the Act are:

New employees filling existing positions qualify only if the previous worker left voluntarily or was terminated for cause.

Eligible new employees must sign a statement certifying that they were unemployed during the 60 days prior to beginning work or that they worked fewer than 40 hours per week at their previous job.

New employees cannot be family members.

New employees are not required to work a minimum number of hours.

The payroll tax benefit also applies to not-for-profit organizations.

Section 179 Expensing limits extended for businesses

The HIRE Act also extended the increased Section 179 expensing limits in effect for tax years beginning in 2008, 2009 and 2010 which provided for expensing qualified machinery and equipment additions up to a maximum of $250,000 with a phase out beginning at $800,000 in qualified additions. For tax years after 2010, the expensing limit returns to $25,000 and the phase out limitation starts at $200,000.

For additional information about the HIRE Act tax benefits, please contact your tax advisor.