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William Perez

HIRE Act Provides Tax Incentives for New Jobs

By March 23, 2010

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Businesses that hire new employees may qualify for two tax incentives under the HIRE Act (HR 2847). This new tax law was signed into law by President Obama on March 18, 2010, after being approved by Congress on March 17. Businesses that hire new employees will not have to pay the employer's share of Social Security tax (6.2% of wages) from the date of hire through the end of 2010. Additionally, businesses that retain a newly hired employee for at least 52 consecutive weeks can qualify for a tax credit of up to $1,000. Both tax breaks are available for new hires who have been unemployed for at least 60 days immediately prior to beginning their new job.

This qualification requirement will impact job-seekers. New hires may be asked to certify that they have in fact been unemployed so that the hiring employer can qualify for the tax breaks. To be an eligible new hire, an individual will need to have worked not more than 40 hours during the 60-day period ending on the day that the person begins their new job. Individuals can be hired in any capacity: full-time or part-time, but to qualify for the credit they will need to work for at least 52 consecutive weeks.

More about the HIRE Act:

Comments
March 23, 2010 at 5:17 pm
(1) DRE says:

Does anybody know if this applies to an owner (less than 50%) who was laid off and rehired?

March 25, 2010 at 1:55 pm
(2) Paycom Payroll Services says:

Paycom’s already implemented the HIRE Tax act into our system so our customers can
HIRE Act Tax Credits Make sure if you’re using a payroll software that you have the ability to take advantage of all the governments credits.

March 28, 2010 at 11:17 am
(3) Salem Lawyer Attorney Information says:

I think this a step in the right direction in stimulating the jobs market. It only makes sense because from a tax revenue stand point as well because the government isn’t collecting much tax if any from the unemployed.

April 13, 2010 at 10:24 pm
(4) Andy says:

As Obama said himself, this this jobs bill is absolutely necessary, it’s by no means enough. There’s a lot more that we’re going to need to do to spur hiring in the private sector and bring about full economic recovery – from helping creditworthy small businesses to get loans that they need to expand, to offering incentives to make homes and businesses more energy efficient, to investing in infrastructure so we can put Americans to work doing the work that America needs done.

September 23, 2011 at 7:34 am
(5) Brett Bilgisayar says:

I wonder if the new job bill, if passed, will bring some more good tax incentives for those who hire new employees. Any incentive to create new jobs has to help the economy.

April 21, 2010 at 4:15 pm
(6) Margot says:

Wait, time out Salem & Andy. I’m all for tax credits, but I’m wary of this particular one. I mean, Social Security is already near insolvency, why attack funding for that sacred cow? And all that’s required is for the employee to “certify” that they’ve been unemployed? I understand it’s just an affidavit form they sign, but don’t you think the potential for employer fraud on that is rampant?

April 21, 2010 at 5:19 pm
(7) William Perez says:

I agree with Margot that this particular tax break might not make a whole lot of sense. It does give an impression that collecting Social Security taxes are less important. But I’m pretty sure Congress will find a way to make up for this lost payroll tax revenue in other ways.

April 28, 2010 at 11:30 am
(8) Capie4 says:

I agree with the idea of creating hiring incentives for America local nationals; either bringing jobs home and reversing the corporate ideals since LBJ, or reducing the American standard of living that to match the labor force of the Countries who are currently working our outsourced jobs will be the only way to solve the unemployment standard….any body want to live in a cardboard box to have a job?…or do you want to live in a cardboard box to bring jobs home? Your choice. (Flame me now! :P )

April 28, 2010 at 3:09 pm
(9) Edwin Vazquez says:

I just lost a job because of this tax break , I worked for a temp agency for a total of 48hrs they did not need me and let me go (cault up with there inventory) Applied at another company got an interview they told me about the tax break they get but i may not qualify because of the temp job. Because of the tax break the other person was worth more to them then I was.

April 30, 2010 at 9:09 pm
(10) Tyler says:

So this is alreeady creating a pretty weird dynamics in the job application world.

But I don’t think this will be sufficient enough for its intended objectives.

May 14, 2010 at 1:58 pm
(11) Shannon says:

Does new hire have to sign the W-11 form if they don’t want to?

May 18, 2010 at 1:23 am
(12) William Perez says:

Shannon, the following statement is found on Form W-11 itself:

“Only employees who meet all the requirements of a qualified employee may complete this affidavit or similar statement.”
http://www.irs.gov/pub/irs-pdf/fw11.pdf

May 18, 2010 at 9:56 am
(13) KD says:

What about ‘seasonal’ employees? We lay off employees for 5-6 months due to frost laws every year. I read it will work for employees laid off due to lack of work and then rehired by the same employee after a 60 day period. Is that the same for seasonal workers?

June 3, 2010 at 10:49 am
(14) John says:

What is with the eligibility date? February 3rd? That was a Wednesday. I hired a new employee who started on Monday, February 1st. So I have missed out by 2 days because someone chose a day in the middle of the week as a start date. That does not make any sense!

June 4, 2010 at 8:16 pm
(15) Tim says:

John–

Fire them and hire someone else.

June 11, 2010 at 1:39 pm
(16) Bob says:

This is one of the dumbest pieces of legislation ever invented. No hiring manager with half a brain will add an employee based on 6.2% savings and a possible $1,000 credit down the road. This will not reduce unemployment at all and will add to the deficit. The problem with people is that they buy into this nonsense and then wonder why this country continues to slide- VOTE EVERYONE OUT OF WASHINGTON- REGARDLESS OF PARTY!!!

June 23, 2010 at 1:35 pm
(17) Jeff, CPA says:

#12 kd – Looks like YES on seasonal work! See QE#5 irs FAQ http://www.irs.gov/businesses/small/article/0,,id=220749,00.html

June 23, 2010 at 3:03 pm
(18) William Perez says:

Jeff, Thanks for the link to the questions and answers from the IRS.

July 26, 2010 at 5:30 pm
(19) Paris says:

We seem to be having a hard time collecting the W-11 from eligible employees. ie – We have to follow up with them when they don’t include it with the rest of their paperwork.

Any advice?

September 17, 2010 at 2:22 pm
(20) gitmo says:

My wife is a new hire and they are deducting a new hire tax out of the paycheck, in addition to all the other taxes. As usual Something is very wrong with this policy, it is not a “credit” but a another punitive”tax” workers must pay out of their pay.

September 17, 2010 at 3:18 pm
(21) William Perez says:

This tax break is for employers only. A business that hires a new worker might not have to pay the employer’s share of Social Security taxes — provided the new hire meets the qualifications. The employee still pays the employee’s share of Social Security tax, which will be deducted out of her paycheck.

October 7, 2010 at 5:55 pm
(22) linda says:

I have spent a considerable amount of time, researching this new law. All I can find are hundreds of sites touting the advantages for the employers, which I believe are minimal. Believing that this is an incentive to hire would be laughable if it didn’t reveal the incredible lack of business savvy our leaders have. What I can not find, other than a couple of payroll service sites, is what happens to the employee? Is their social security account forever short the company match? If it is, we are not going to participant since shorting an employee’social security match seems to be a bit of a harsh welcome back to the work of employment.

October 7, 2010 at 6:10 pm
(23) William Perez says:

The payroll tax exemption and the new hire tax credit impact only the business’s tax situation. Employees still pay their half of the Social Security and Medicare taxes. And the employer still pays the employer’s share of Medicare. The effect of the exemption for the employer’s share of Social Security does impact revenues going into Social Security. But Social Security is not a personal account. Social Security might have to restructure how they determine benefits or payouts, but that is beyond the scope of this particular tax incentive.

October 28, 2010 at 12:34 am
(24) Crystale says:

I received the W-11 form the other day from my employeer and no idea what it was even about so I began asking some superiors of mine….and of course they have no idea as well. So after educating myself on this I am baffled!! I refuse to sign this as I work for the largest company across the U.S. in its field and i do know first hand how they have in essence “created” ways to obtain more money from our customers…and even the employees. Do I have the right to choose NOT to complete and sign this form for them? It makes me sick to my stomach just thinking about me doing something that would allow them any sort of “tax break”……not a credit so they could save 6.2% on each employee meeting these “requirements”. As I remember…..they let quite a lot of employees go from 12/2009-01/2010 that had been there for a year or more in my area and acouple other areas of the sort (their call centers) all across the U.S. and many many new training classes magically started back up after the 2/3/10 requirement date. I feel that if they are going to do this then they need to have companies….especially ones of large financial staus of mine also meet certain requirements. I think they have to put a cap on how large a company is (and possibly how much money they were given to bail them out during the crash), how how their turnover rate is and also I dont feel like they should be able to consider employees brought on by a temp/contact agency in this at all b/c that temp/contract agency is the ones out there doing ALL the work finding these employees in the first place. Why cant they receive the credit since they are the ones out there networking and finding new hires? Its gotten so back that where I am they dont even hire on people themselves in the majority of the departments but rather have the agencies do it for them……pathetic! I really need to know if I have the right to refuse to sign this for my employeer b/c quite frankly they dont deserve it!!!

March 31, 2012 at 3:24 am
(25) Carlos says:

Does anyone know the correct forms that a tax exempt organization needs to file with the IRS in order to claim the new hire retention credit? I have called the IRS directly and the people I have talked to don’t know the answer.

thanks!!!!

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