Good Afternoon:
I am writing to give you an overview of the key tax changes affecting business in the Hiring Incentives to Restore Employment (HIRE) Act enacted on March 18, 2010. The new law provides hiring incentives, expense extensions and tax credits to help stimulate the hiring of unemployed workers.
- Payroll Tax Forgiveness – a qualified employer is exempt from paying the 6.2 percent share of Social Security payroll tax on qualified new hires. A “qualified employee” must start work anytime after February 3, 2010 and before January 1, 2011, and generally must have been unemployed for at least 60 days or worked less than 40 hours per week before his or her start date with your company. The newly hired cannot be related to the owner or a majority stockholder of the company; they can only be hired to replace a position from which someone left voluntarily or someone was let go for good cause. Retained Worker Credit – Tax Credit Up to $1,000 – for employers who hire individuals, qualified under the Payroll Tax Forgiveness, AND keep them on the payroll for at least 52 consecutive weeks may be eligible for a tax credit for each qualifying employee on their 2010 tax return. The Credit is the lesser of $1,000 or 6.2% of wages paid to the qualified retained working during the 52-consecutive week period. Wages for last 26 weeks must be equal to at least 80% of wages for first 26 weeks.
- Extension of Section 179 Expensing – gives a one-year extension to enhanced expensing rules which was to expire December 31, 2009. The maximum deduction for Section 179 was $250,000 with a phase out limit for qualifying property purchased at $800,000. Without the new legislation the limit would be $125,000 with a $500,000 cap. The HIRE Act extends the enhanced expensing at the $200,000/$800,000 threshold levels through December 31, 2010.
Requirements
- Use new IRS Form W-11 to confirm qualified employees under the HIRE Act. Only employees who meet all requirements may complete this form and sign the affidavit under penalty of perjury. Click Here for Form W-11.
- Beginning with Second Quarter 2010, use new IRS Form 941 to claim an exemption equal to the employer’s share of Social Security taxes on wages paid in 2010. Credits for qualifying First Quarter 2010 wages will be reported on the Second Quarter return. You should Not file an amended return for First Quarter 2010. Click Here for the Newly Revised Form 941.
I hope this information is helpful. If you believe that your company may qualify for any of these benefits, contact our office to ensure that you are meeting the criteria and receiving the correct benefits.
–Ben R. Loggins
Certified Public Accountant
