New hire credit

[LCP]

Taxpayer was unemployed about 5 years ago, exausted all his unemployment benefits, dabbled with a few Schedule Cs and now hopes to enter the ranks of the employed again.

What do you think his chances of qualifying (his prospective employer) for the new hiring incentives are?

[BOB W]

Taxpayer was unemployed about 5 years ago, exausted all his unemployment benefits, dabbled with a few Schedule Cs and now hopes to enter the ranks of the employed again.

What do you think his chances of qualifying (his prospective employer) for the new hiring incentives are?

I'm sure it will work for him, but there are many others in the same boat. I give him a 5% advantage.

[LCP]

These are the first details I've seen anywhere. It appears that there are all kinds of exclusions for relatives except that maybe a spouse is specifically meant to be eligible.


New Law Offers Employer Payroll Tax Break
On Thursday, March 18, 2010, the President signed the Hiring Incentives to Restore Employment Act (HIRE Act) into law.
The bill, estimated to cost about $18 billion, had bounced back and forth between the House and Senate during the past month. Often referred to as a job stimulus bill, the HIRE Act provides a payroll tax break to employers who hire unemployed workers after February 3, 2010, through the end of 2010. The tax break applies to wages paid with respect to employment on the day after the HIRE Act becomes law.
Section 101 of the HIRE Act provides details on this tax incentive. Under these provisions, most employers do not have to pay their portion of Social Security taxes (6.2 percent) for newly hired, unemployed individuals, who are called "qualified individuals." With one exception, this special exemption is not available to U.S. and state governments, or any of their political subdivisions (e.g., city or county governments). The exception is that the tax break is available to public institutions of higher education (as defined in Subsection 101(b) of the Higher Education Act of 1965).

HERE'S THE GOOD PART >>>>>>

The requirements for Qualified Individual under the HIRE Act are as follows:
o The individual began employment with the qualified employer after February 3, 2010 (i.e., February 4, 2010), and before January 1, 2011 (i.e., December 31, 2010).
o The individual was employed for no more than 40 hours during the 60-day period ending on the date that the individual was hired by the qualified employer. This requirement must be certified by an affidavit signed by each qualified individual, under penalties of perjury.
o The individual was not employed by the qualified employer to replace another employee unless the other employee resigned voluntarily or was terminated for cause.
o The individual does not bear any of the following relationships to any owner (as defined by Subsection 51(i)(1) of the Internal Revenue Code) of the qualified employer:
• A child or a descendant of a child
• A brother, sister, stepbrother or stepsister
• The father or mother, or an ancestor of either
• A stepfather or stepmother
• A son or daughter of a brother or sister of the taxpayer
• A brother or sister of the father or mother of the taxpayer
• A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law
• An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to Subsection 7703 of the Code, of the owner) who, for the taxable year, has the same principal place of abode as the owner and is a member of the owner's household


<<<<<<<<<<<<<<<<<<<<<<<


There are at least three payroll aspects of the HIRE Act that are not entirely clear.
First, the law applies to "wages paid by a qualified employer with respect to employment during the period beginning on the day after the date of enactment...and ending on December 31, 2010." It is unclear whether this phrase refers to wages earned because of the phrase "with respect to employment" or whether the phrase refers to wages paid. Because of variable work schedules, payroll systems can more easily track tax changes based on a pay date than an earnings date.
Second, it is unclear what changes will be required to Form 941, the quarterly tax report. The IRS might require specific documentation of each qualified individual as an attachment to the form. Alternatively, the IRS could add a new line that would simply capture the reduction amount. With the end of the first quarter approaching, there is not much time to react to this new law.
Third, a few employers may want to opt out of this tax break for tax-related reasons. Accordingly, the HIRE Act allows employers to do this although it is unclear what the process will be. The law instructs the Secretary of Treasury to provide guidance.
Employers of all sizes qualify for the payroll tax break. If an employer receives the Work Opportunity Credit for a qualified individual, the employer is not eligible for the tax break under the HIRE Act. Also, under Section 102 of the HIRE Act, if the qualified individual is retained by the employer for 52 consecutive weeks, the employer is entitled to a $1,000 tax credit. During the last 26 weeks of that period, the qualified individual must have wages that are at least 80 percent of the wages for the first 26 weeks.
On behalf of our many payroll clients and service bureaus, Infinisource has already been working on updates to our comprehensive payroll and tax administrative services. We have developed a sample affidavit to confirm qualified individual status. This affidavit will soon be put into production. Infinisource has also developed a process for employers to report qualified individuals. More detailed information will be forthcoming shortly.
More information is available on our websites: www.infinisourcepayroll.com and www.infinisource.net.

[Mo Sheets]

Full-Time Only?

I haven't had a chance to read anything about this...only what I've seen on the news. Is this for full-time new hires or do part-time employees qualify too?

Thanks!

[LCP]

Just guessing here, but since the employer's payroll tax savings is relative to the amount paid, the govt wouldn't care whether full time or not.

Note that to qualify for the credit after 52 weeks, there are requirments to prevent the employer from keeping the employee on at a much reduced work load just to qualify.

OTOH, that's a pretty good size credit to hand our for an employee that was consistently part-time at 5 hours a week for 52 weeks.

[Gretel]

I thought it was for full time only and that even if you concert part time employee to full time employee you could get some of this credit.