April 15, 2010

New Tax Benefits for Hiring New Workers

On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment Act (“HIRE Act”, Public Law No: 111-147).  The HIRE Act creates two new tax benefits designed to encourage employers to hire and retain new workers:

  • Employers who hire unemployed workers between 2/3/10 and 1/1/11 may qualify for a 6.2% payroll tax incentive; thus, in effect, exempting them from the employer’s share of social security tax on wages paid to these workers after March 18, 2010. This reduction does not affect the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2% share of Social Security taxes, as well as income taxes.
  • For each unemployed worker retained for at least a year, employers may claim a new hire retention credit of up to $1,000 per worker when they file their 2011 income tax returns.

The HIRE Act requires employers to obtain certification from each new eligible hire that he/she has been unemployed during the 60-day period prior to the employment start date; or, had worked less than 40 hours for any employer during the 60-day period.  The IRS recently issued a new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit that can be used to obtain this certification from the employee. 

To claim the payroll tax exemption for eligible new hires, employers would use Form 941, Employer’s Quarterly Federal Tax Return.   Currently, the Form 941 to be used beginning with the second calendar quarter of 2010, is only available in draft form; the IRS is expected to release the final Form 941 in May, 2010.

In addition, the IRS has posted some FAQs relating to the payroll tax exemption and the new hire retention credit. 


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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