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Under the recently enacted HIRE Act, the following
benefits are derived from hiring previously unemployed
workers:
-
Payroll Tax Holiday
- The law exempts any private-sector employer that
hires a worker who had been unemployed for at least
60 days (can have worked 40 hours within the 60
days) from having to pay the employer's 6.2% share
of the Social Security payroll tax on that
employee’s wages for the remainder of 2010. Thus, if
the newly-hired and previously-unemployed worker
earns $106,800 after March 18, 2010 and before the
end of the year, the company could save a maximum of
$6,621. This provides the employer with an immediate
benefit by reducing the amount the employer must pay
in employment taxes.
-
Retention Credit
- As an additional incentive, for any qualifying
employee hired under this initiative that the
employer keeps on payroll for a continuous 52 weeks,
the employer is eligible for an additional
non-refundable tax credit equal to the lesser of
$1,000 or 6.2% of the wages. Since the 52-week
requirement cannot be met until the subsequent year,
the credit will be taken on the employer’s 2011 tax
return. In order to be eligible, the employee's pay
in the second 26-week period must be at least 80% of
the pay in the first 26-week period. This credit is
not available for domestic workers.
Will the payroll tax
holiday and the employee retention credit apply if the
new hire is the spouse of the business owner? The law
specifically excludes the taxpayer's children or their
descendants, siblings or step-siblings, parents or a
parent's ancestor, step-parents, nephews, nieces,
uncles, or aunts, and in-laws but not the business
owner’s spouse. Thus a spouse who has not worked more
than 40 hours in the 60 days prior to the hire date may
qualify provided the spouse does not fail the
relationship test with another co-owner of the same
business. For example a father-son owned business where
the father owns more than 50% of the business would
preclude the son’s spouse from qualifying since she
would be related to the father, a more than 50% owner.
If you have questions related to hiring your spouse, or
how the HIRE tax benefits might apply to your business,
please give this office a call. |
