New Hiring Incentives

The Hiring Incentives to Restore Employment (HIRE) Act was enacted on March 18, 2010. This tax law provides two new benefits to employers who hire certain previously unemployed workers ("qualified employees").

First, employers who hire a qualified employee will get an exemption on the employer's 6.2 percent share of social security tax on the wages paid to these employees, for wages paid from March 19, 2010 through December 31, 2010.

A qualified employee are individuals who begin employment after February 3, 2010 and before January 1, 2011, who have either been unemployed or employed less than 40 hours during the 60-day period before employment. The qualified employee cannot be a relative or otherwise related party.

You also can't lay someone off and then rehire them or another person to do the same job. However, you can qualify for the exemption if you replace someone who quit or was terminated for cause.

To put this in plain English, if you hire someone after February 3rd and expand your payroll, you may qualify for this exemption to avoid paying the 6.2 percent employer portion of the social security tax.

Employers should use the new Form W-11 to confirm new hire eligibility. Form W-11 must be signed by the employee to qualify for the exemption.

Additionally, for each new employee retained for at least 52 consecutive weeks, employers will be eligible for a general business tax credit equal to the lesser of $1,000 or 6.2 percent of wages paid.

I'm not clear but I believe this new hire retention credit will be a 2011 tax year credit since the 52nd week of continuous employment will fall sometime in 2011.