Significant New Tax Incentives for Employers

      Under the Hiring Incentive to Restore Employment Act, which President Obama signed into law on March 18, 2010, employers who hire a person who was previously unemployed for at least 60 days prior to being hired (a Qualified Employee) after February 3, 2010, and before January 1, 2011, will be given a payroll tax exemption on wages paid in 2010 for such employee.  That means the employer will not have to pay the 6.2% Social Security tax on wages paid to the new employee.

None of the following persons will qualify as a Qualified Employee:  self-employed persons, members of the employer’s family, persons “affiliated” with the employer, or an employee hired to replace an employee who has been fired without cause.  Employees in any of these categories will not be eligible for the exemption.

The tax exemption will not affect the Medicare taxes (1.4% of wages by both employer and employee) or the employee’s 6.2% Social Security tax; those levies will still have to be paid.

In addition to the Social Security exemption, the Act provides for tax credits of up to $1,000 for each Qualified Employee who remains in his or her job with the employer for at least 52 consecutive weeks.  This credit is available to the employer in the tax year when the 52 weeks of consecutive employment ends.

The Act is intended to stimulate hiring by encouraging employers to hire the unemployed, and the savings can be significant.  The Act is complex; but if there is technical compliance with its provisions, an employer can realize a material assist as we continue to slough our way out of the Recession.  Let us know if we can assist you in taking advantage of the provisions of this Act.

— Ken Butera