HIRE Act Payroll Tax Exemption

In conjunction with the recently-passed Hiring Incentives to Restore Employment (“HIRE”) Act, the Internal Revenue Service (“IRS”) just issued a form Employee Affidavit that employers can use to claim a payroll tax exemption.  You can view and print out the form affidavit at: http://www.irs.gov/pub/irs-pdf/fw11.pdf

As we detailed in our earlier posting on the HIRE Act, the new law contains two significant tax breaks that are available to most private employers.  First, it exempts an employer from its obligation to match the Social Security portion of FICA tax in 2010 for any unrelated employee, hired after February 3, 2010 and before January 1, 2011, who (1) swears under oath that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employee begins his or her employment with the employer, and (2) was not hired to replace another employee, except an employee who voluntarily resigned or was terminated for cause.  In order to establish that an employee’s hiring meets the first of those two elements, employers can have the qualified employee sign the form affidavit, which is also known as a Form W-11.  Second, the HIRE Act also offers a tax credit to companies that keep a newly-hired qualified employee for at least 52 consecutive weeks, so long as the employee’s wages during the last 26 weeks of that period are at least 80 percent of his or her wages during the first 26 weeks of the period.  The tax credit is equal to the lesser of $1,000 or 6.2 percent of the employee’s wages during the 52-week period.

Should you have any questions about the HIRE Act or ascertaining its applicability to newly-hired employees, please contact your Arnstein & Lehr LLP attorney.

U.S. Senate passes HIRE Act

News reports say that House Speaker Nancy Pelosi expects the House will soon consider the Senate-passed $15 billion jobs bill (H.R. 2847), known as the Hiring Incentives to Restore Employment (HIRE) Act, that passed the Senate by a 70-28 vote on Feb. 24.  The bill passed by the Senate and presently before the House includes tax incentives for businesses to hire unemployed workers in 2010, an extension of federal aid for highway programs, an extension of a small business expensing tax break, and the establishment of a Build America Bonds program.

The tax incentives for hiring in the proposal presently before the House includes a new program that would exempt employers that hire unemployed workers from paying Social Security taxes on the new hires for the remainder of 2010. The proposal would also offer employers an additional $1,000 tax credit for any new hire who stays on the job for one year.

The HIRE Act significantly pared down the House’s original bill that it passed Dec. 16 by a narrow 217-212 vote.  The original House bill was a much larger $150 billion package that also included six-month extensions of the emergency unemployment insurance benefits program and the COBRA subsidies to help those who have lost their jobs to continue their health insurance.

Short extensions of unemployment benefits (until April 5) and COBRA subsidies (for those involuntarily terminated between March 1 and March 31) were signed into law on March 2.

Even if the HIRE Act is enacted in its present form (and odds are that it will not be since 3 caucuses within the Democrats in the House are already on record that they have problems with the bill), it is expected to create a quarter of a million new jobs.  That is not much when compared with the 8 million jobs lost in the US since 2007, but proponents are calling the HIRE Act a “good first step.”