Hiring Incentives to Restore Employment Act

August 2, 2010

On March 18, 2010, the Hiring Incentives to Restore Employment (HIRE) Act was enacted to help create jobs and decrease unemployment. The HIRE Act creates two new tax benefits for employers hiring unemployed workers.

The first benefit is the payroll tax exemption, providing qualified employers* with an exemption from the employer's 6.2% share of social security tax on wages paid to qualifying employees**.  This is in effect for wages paid from March 19, 2010 through December 31, 2010. 

The second benefit is that for each qualified employee retained for at least 52 consecutive weeks, businesses will also be eligible for a general business tax credit, which amounts to 6.2% of wages paid to the qualified employee over the 52 week period, up to a maximum credit of $1,000.

• *Qualified Employers are any employer other than government or household employers
• **Qualified Employees are non-family members who have not been employed for more than 40 hours during the previous 60 days and who started working for you after February 3, 2010 & before January 1, 2011. This employee cannot be employed by you to replace another employee, unless the other employee left voluntarily or was terminated for cause. The employee must certify that they are qualified by signing a form W-11. The form W-11 does not need to be sent to the IRS, but the employer should maintain these with their payroll records. In lieu of form W-11, the employer can use a similar statement as long as it contains the same information as form W-11 and the employer signs it under penalties of perjury.

 

Claiming the Credit for QuickBooks Users, using version 2007 or later

1. Download the latest payroll update. Go to the "Employees Menu" and choose "Get Payroll Updates" then click "Update" if you are not running at least version 21011.
2. Have your employee sign a W-11(http://www.irs.gov/pub/irs-pdf/fw11.pdf).
3. Run "Payroll Setup" and choose "Add New" for an employee not already in QuickBooks, or choose "Edit" for an employee already in QuickBooks. On the Federal Tax Information screen, click the drop-down arrow next to the HIRE Act Exemption box, and select Qualified Employee. Liability Adjustments need to be made for each paycheck for each qualified employee for payroll after April 1 until the date that you designated the employee as qualified in QuickBooks. You do not need to make any liability adjustments for the first quarter; the form 941 will support this adjustment. For specific instructions, contact your 415 Advisor.

Claiming the Credit for Non-QuickBooks Users

If you are using another payroll service, contact that service and discuss the procedures for claiming the credit. If you are preparing your own payroll, then you should do the following:

• For wages paid during the 1^st Quarter of 2010, claim the credit on your 2^nd Quarter Form 941.
• For wages paid during the 2^nd Quarter of 2010, claim the credit on your 2^nd Quarter Form 941. It is not necessary to pay the taxes and then request a credit; simply deduct the credit from your 941 tax deposits.
• To report on the Form W-2, report the wages covered by the payroll tax exemption in box 12, using the code CC.

If you have any questions regarding the HIRE Act, do not hesitate to contact your 415 Advisor at (330) 492-0094.

by: Barbara D. Hupp

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