Labor & Employment Law Blog

Under the HIRE Act, two tax incentives are available:

1. Employers who hire between February 3, 2010, and December 31, 2010, qualifying workers may qualify for a 6.2% payroll tax incentive.

2. An employer may claim on its 2011 federal income tax return an additional tax credit of up to $1,000 for each employee hired under the Act who the employer retains for at least one year. The retention credit is the lesser of either 6.2 percent of the wages paid by the employer to the retained qualified employee during the 52 consecutive week period or $1,000.

Some of the requirements and limitations of the Act include the following:

1. The Act requires employers that wish to claim the tax incentives to obtain from each eligible new hire a statement certifying that he or she was unemployed during the 60 days before beginning work or that he or she worked fewer than 40 hours for another employer during the same 60-day period. The Internal Revenue Service created Form W-11 for this purpose. Click here to download a copy of the form.

2. New hires to fill existing vacant positions qualify so long as the employees being replaced were terminated for cause or voluntarily quit.

3. The 6.2 percent payroll tax incentive may apply also to employees who are rehired so long as such employees were unemployed or underemployed for 60 days immediately preceding the date of rehire.

4. Family members and other relatives of the employer are not eligible.

5. The payroll tax incentive may be claimed on the employer's quarterly federal tax return (form 941) beginning the second quarter of 2010.

6. The retention credit is available for each employee who is a qualified employee for purposes of the payroll tax incentive and who remains employed for 52 consecutive weeks so long as the employee's wages do not decrease significantly in the second half of the year. Specifically, the employee's wages in the second 26 weeks of the year must be at least 80% of the employee's wages during the first 26 weeks of the year.

7. Businesses, agricultural employer, tax-exempt organizations, Native American tribal governments, and public colleges and universities are eligible to claim the tax incentives provided by the Act. Household employers do not qualify.