Money for HIRE
HIRE (Hiring Incentives to Restore Employment) is the new law that provides financial incentives to hire unemployed workers. (Who dreams up the snappy names and acronyms for the various tax bills?)
The law has two attractions:
1) Hire a qualified new employee and you don’t pay OASDI Social Security tax (most of us call this FICA) on their wages for the rest of the year. This is a savings of 6.2% on the first $106,800 of salary.
2) Keep the employee for a year, and you receive a $1,000 tax credit.
The first part leaves money in your pocket immediately, and for qualified employees hired in the 1st quarter you get a credit on your 2nd quarter Form 941. The second part reduces your business income taxes (C-corp.) or your personal income taxes (S-Corp., LLC, Partnership or Sole Proprietor).
So what are the risks and how do you qualify?
The biggest risk is assumed by the employee– she has to sign an affidavit stating she has worked 40 hours or less in the last 60 days. Apparently this has dire but unnamed consequences for the new hire that lies, but frees you from playing Sherlock Holmes. Act in good faith and you’re saved or,at least, protected.
Eligible new hires from February 8th to December 31st, 2010 qualify. You can’t fire an existing employee just to hire another person eligible for the credit. You can’t hire your kids, your siblings, your in-laws, parents, grandparents or relatives. It appears that hiring your spouse is allowed, that may have other drawbacks. There is no minimum on the number of hours a person works (part-time help is eligible), but the work has to be fairly uniform throughout the year. No working 40 hours a week during the summer and 8 hours a week in the off season. There is no limit on the number of qualified employees you can hire.
Should you do this? The qualifications for the new employees from the IRS standpoint appears simple, but I doubt whether prospective employees are going to state “HIRE eligible – haven’t worked for months” on their resumes. You’re still going to look at qualifications and the other hiring factors first, and the potential for a credit will either be a nice side benefit or a tie-breaker. Is it going to create jobs – who know?
Next time we will look at what this means for you the paper shuffler. Did you really think there would be no paperwork?