How the HIRE Act Can Benefit Your Business

The President recently signed into law the “Hiring Incentives to Restore Employment Act of 2010.” The centerpiece of this Act is a payroll tax holiday and up-to-$1,000 tax credit for businesses that hire unemployed workers. In addition to these new hiring incentives, the HIRE Act also includes a one-year extension of the enhanced small business expensing option. Both of these provisions are extremely important to many businesses.

Payroll tax holiday and up-to-$1,000 credit for employers who hire unemployed workers.
To help stimulate the hiring of workers who have been unemployed for at least 60 days, the new law exempts any private-sector employer from having to pay the employer’s 6.2% share of the Social Security payroll tax on that employee for the remainder of 2010. As an additional incentive, for any qualifying worker hired under this initiative that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for an additional non-refundable tax credit of up to $1,000 after the 52-week threshold is reached, to be taken on their 2011 tax return. In order to be eligible, the employee’s pay in the second 26-week period must be at least 80% of the pay in the first 26-week period.

For the hiring to qualify, the new hire must sign an affidavit, under penalties of perjury, stating that he or she hasn’t been employed for more than 40 hours during the 60-day period ending on the date the employment begins.

Workers hired after the date of introduction of the legislation (Feb. 3, 2010) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after March 18 receive the exemption for payroll taxes. Some additional features of the new hiring incentive include:

  • The tax benefit of the new incentive is immediate. It puts money into a business’ cash flow, since the tax is simply not collected in the first place.
  • The tax benefit generally applies only to private-sector employment, including nonprofit organizations—public sector jobs are generally not eligible for either benefit. However, employment by a public higher education institution qualifies.
  • There is no minimum weekly number of hours that the new employee must work for the employer to be eligible, and there is no limit on the dollar amount of payroll taxes per employer that may be forgiven.

Extension of enhanced small business expensing.
The new law extends the enhanced expensing rules, which allow qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. For tax years beginning in 2010, the maximum amount that a business may expense is $250,000, and the expensing election begins to phase out when a business buys more than $800,000 of expensing-eligible assets. These dollar limits are the same as those that were in effect for 2008 and 2009. Had the HIRE Recovery Act not been passed and signed into law, these dollar limits would have dropped this year to $134,000 and $530,000 respectively.

If you would like more details about these provisions or any other aspect of the new law, please do not hesitate to contact us.

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