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This article briefly and broadly summarizes the tax benefits in the
Hiring Incentives to Restore Employment Act of 2010 (HIRE Act), which
was signed on March 18. The HIRE Act has two main benefits:
Payroll Tax Holiday
The relief applies only to the employer's share of Social Security
taxes, which is the tax at the 6.2 percent rate. It doesn't apply to the
1.45 percent Medicare portion of the employer's tax, nor to any part of
the employee's tax. The amount of tax forgiven per employee cannot
exceed $6,621.60 because the Social Security tax applies only to the
first $106,800 of wages paid in 2010 (6.2 percent tax x $106,800 =
The relief applies to wages paid to a qualified individual beginning
on March 19, 2010 and ending on December 31, 2010. A qualified
individual must certify by a signed affidavit, under penalties of
perjury, that he hasn't been employed for more than 40 hours during the
60-day period ending on the date the individual begins employment with
the employer. An employee cannot be employed to replace another employee
of the employer unless the other employee separated from employment
voluntarily or for cause. The individual cannot be a relative of the
An employer may qualify for the payroll tax holiday when it hires an
otherwise qualified individual to replace one who was terminated for
cause or due to other facts and circumstances, such as cases in which a
factory is closed due to lack of demand. When the factory reopens, the
payroll tax holiday can be claimed both for rehiring old workers and
hiring new workers. However, an employer who terminates an employee
without cause in order to claim the payroll tax holiday for hiring the
same or another employee doesn't qualify.
Under existing law, employers who hire members of certain targeted
groups before September 2011 may claim a work opportunity credit (WOTC)
equal to a percentage of up to $6,000 of first-year wages per employee.
An employer may elect not to have the payroll tax holiday apply. Unless
the employer elects out of the payroll tax holiday, wages paid to a
qualified individual won't qualify for the WOTC during the one-year
period beginning on the date that the employer hired the individual. An
employer may wish to elect out of the payroll tax holiday because the
WOTC is in many cases more valuable than the payroll tax holiday.
New Credit for Each Retained Worker
For any tax year ending after March 18, 2010, the HIRE Act provides a
credit for "retained workers." This is any person who is a qualified
individual for purposes of the payroll tax holiday, was employed by the
employer during the tax year for a period of not less than 52
consecutive weeks, and whose wages from such employer during the last 26
weeks of the period equaled at least 80 percent of the wages for the
first 26 weeks of the period. The credit is computed by increasing the
current year business credit, for each retained worker with respect to
which the 52 consecutive week requirement is first satisfied during the
tax year, by the lesser of $1,000 or 6.2 percent of the wages paid
during the 52 consecutive week period. If a retained worker's wages
during the 52 consecutive week period exceed $16,129, the increase to
the business credit will be $1,000. For an employer using the calendar
year, the increase will be claimed on the employer's 2011 tax return.
Example: Z Corporation, a calendar year taxpayer, hires
Rachel, a retained worker, on March 20, 2010. The 52-consecutive-week
requirement is first satisfied in 2011 if Rachel works for Z Corporation
until March 19, 2011. Rachel's wages for this period are $50,000. Z
Corporation can increase its business credit on its 2011 tax return by
$1,000 on account of Rachel.