HIRE Act: Tax Incentives For Hiring Unemployed Workers

Did you know the government enacted two tax benefits last spring available to businesses that hired workers who were previously unemployed or working part time?

This could impact growers who laid off workers during the winter and rehired (or hired new) in the spring. Here are the facts:

–Employers who hire unemployed workers after Feb. 3, 2010 and before Jan. 1, 2011 may qualify for a 6.2 percent payroll tax incentive (in effect, exempting them from their share of Social Security taxes on wages paid to those workers after March 18, 2010).

–The reduced tax withholding has no effect on the employee’s future Social Security benefits, and employers still need to withhold the employee’s 6.2 percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

–Also, for each worker retained for at least a year (52 weeks), businesses may claim an additional general business tax credit up to $1,000 per worker when they file their 2011 income tax returns.

–Employers are required to get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked no more than 40 hours for anyone during the 60 days period. Click here to download a PDF of the form.

–Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly hired employees.

“These tax breaks offer a much-needed boost to employers willing to expand their payrolls,” says IRS commissioner Doug Shulman.

Retailers who hired in the first and second quarters of 2010 but weren’t aware of this tax benefit can file an amended 941 form for the second quarter taxes to receive their benefit.

Click here for a list of frequently asked questions about the payroll tax benefit.

Click here for a list of frequently asked questions about the general business tax credit.

Click here for the 941 Quarterly Federal Tax Return Form.

Click here for the 941-X Adjusted Quarterly Tax Return Form
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