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Are you thinking of hiring new employees, or rehiring previously laid-off workers? You may qualify for
a payroll exemption as well as a business credit under the newly enacted Hiring Incentives to Restore
Employment Act (HIRE Act).
Here are details.
Payroll exemption. When you hire certain unemployed workers, you may qualify for
forgiveness of the 6.2% social security tax you would normally pay on the wages of those new employees.
Your new hires must start work after February 3, 2010, and before January 1, 2011. In addition, they'll
have to certify they worked less than 40 hours during the 60-day period prior to starting the job with you.
Relatives are ineligible, and your new workers generally can't displace a current employee.
The exemption is available for wages paid from March 19, 2010 through December 31, 2010. You'll claim
it on your quarterly payroll reports, beginning with the second quarter of 2010.
Note that you'll still have to withhold and deposit the employee's portion of the social security tax,
and that both you and your employee are required to pay Medicare tax on all wages.
Be aware, too, that while the exemption will free up current cash flow, you will have less payroll tax
expense, and therefore a smaller deduction on your business tax return at year end. Also, wages that are
eligible for the exemption do not qualify for purposes of calculating the Work Opportunity Tax Credit unless
you opt to forego the exemption.
Business tax credit. In conjunction with the exemption for social security tax, you can
take a federal tax credit for the newly hired workers who stay with your company for 52 consecutive weeks.
The maximum credit is $1,000 per retained employee, and you'll claim it on your year-end business income
tax return.
The HIRE Act also extended the enhanced Section 179 expensing rules. Through the end of 2010,
you can expense up to $250,000 of machinery and equipment you purchase and use in your business, as long
as the total cost of the assets you buy doesn't exceed $800,000. Bonus depreciation, which expired at the
end of 2009, was not extended.
Give us a call to discuss the new legislation. We're here to help you get the most benefit from the tax
breaks available to you.
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