The Hiring Incentives to Restore Employment Act of 2010, more commonly referred to as the HIRE Act, was passed by Congress and signed into law by the President in the first quarter of 2010. The Act provides employers with incentives to hire unemployed individuals. The provisions of this new legislation apply to workers hired after Feb. 3, 2010, but only for wages paid after March 18 (the date the legislation was signed into law).
New Employee Qualifications - Although there is no minimum number of hours that a new employee needs to work in order to qualify for either benefit, an employer cannot claim the new tax breaks for hiring family members. A worker who replaces another employee who performed the same job for the employer isn't eligible for the benefit, unless the prior employee left the job voluntarily or for cause. The payroll tax holiday can be claimed for rehiring old workers as long as that worker was terminated due to facts and circumstances, such as a factory closure due to lack of demand for the product.
Employee Documentation To validate the new hire for the benefits, an employer must have the employee sign an affidavit, under penalties of perjury, stating that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employment begins. The IRS provides Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, for this purpose. Employers do not send the completed and signed form to the IRS, but are required to retain it with their other payroll and income tax records.
Interaction with the Work Opportunity Credit (WOTC) An employer must choose, on an employee-by-employee basis, whether to claim the HIRE benefits or the WOTC; double dipping is not allowed. The WOTC is in many cases more valuable than the payroll tax holiday, especially for low-wage employees, because it is generally 40% of qualified first-year wages of up to $6,000, for a maximum credit of $2,400 per worker.
The payroll tax holiday is equal to 6.2% of wages, and applies only to wages paid through Dec. 31, 2010. However, the WOTC is harder to qualify for, because the employee must be certified by an agency as belonging to a targeted group. The main qualification for a payroll tax holiday is that the employee has been unemployed for 60 days, and the employee's affidavit is sufficient for this purpose.
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