IRS Details HIRE Act Tax Breaks for Small Businesses

Small business ownersThe Internal Revenue Service has provided some important details on the new Hiring Incentives to Restore Employment (HIRE) Act signed into law by President Obama on March 18 that aims to spur small business hiring.
Businesses that hire unemployed workers this year – after Feb. 3, 2010 and before Jan. 1, 2011 – can qualify for a 6.2 percent payroll tax incentive. It would exempt employers from their share of Social Security taxes on wages paid to these workers after Mach 18, 2010.
The IRS clarifies that this incentives will have no effect on the employee’s future Social Security and Medicare benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, and income taxes.
For each worker who holds a job for at least a year, businesses may claim an additional business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns, the IRS said.
“These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead,” said IRS Commissioner Doug Shulman.
Employers who are replacing existing positions also qualify, but only if the “workers they are replacing left voluntarily or for cause,” the IRS said. Family members and other relatives do not qualify.
The HIRE Act also requires that the employer obtain a statement from each eligible new hire certifying that he or she was unemployed “during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period.”
The IRS said it is developing a form employees can use to make the required statement.
What businesses qualify for the tax breaks? The IRS said “businesses, agricultural employers, tax-exempt organizations and public colleges and universities” qualify to claim the payroll tax benefit for eligible newly-hired employees. But household employers cannot claim the tax break.
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