If you’re getting ready to hire someone whose been unemployed for 53 days, you might want to give it another week. Congress has passed the HIRE Act giving tax credits to employers who hire people who have been in the unemployment lines for at least two months. Here are the details:
The hiring period is between February 3, 2010 and December 31, 2010, so if you hired someone last month please check with them as they might qualify. Starting with March 19th, 2010, employers can skip their half of the 12.4% Social Security tax on their new employee’s wages through the end of the year. This can provide a tax benefit up to $6,621.60 per employee.
The employee has to have less than 40 hours of employment in the 60 days prior to being hired. Part of this is to help people who have just not been able to find even part-time or minimum wage jobs, or perhaps are taking advantage of the extended unemployment compensation periods. The other reason for the 60 day rule is to keep employers from firing all their employees and then re-hiring them to get the credit. Also, if you do hire someone it has to be for either a new position or a position that was vacated voluntarily or for just cause. No trading out your easily replaceable employees just to get the credit.
If you keep your new employee for a year you get an additional $1,000 credit. Again, there is a catch. Their pay for the last six months of their employment has to be at least 80% as high as the first six months. I suppose this is to prevent employers from cutting hours towards the end of the year but keeping the employee on the books just to get the credit.
Details right now are unclear but the credit will most likely be taken on Form 941. Make sure you provide adequate information on new hires to your payroll service or cpa to ensure that they properly account for this credit. As always, before you come up with your own tax planning scheme (like giving all your employees a two month’s severance package with incentives to volunteer for you until you can hire them all back for the credit) talk to your tax accountant.