Tax Holiday. Employers receive a tax Holiday for their portion of the FICA tax for certain workers hired after February 3, 2010 and before January 1, 2011.  An employer is excused from paying its share of the 6.2% of the first $106,800 of wages for the qualified employees during the calendar year.   The maximum value for each qualified employee is $6,621.   This tax Holiday does not include the Medicare Hospital Insurance contribution (1.45% on all wages), the federal unemployment or state unemployment taxes, and other state employment tax.

Qualified employees are defined as:

• Begins work after February 3, 2010 and before January 1, 2011 in either a full-time or part-time job.
• The individual was employed a total of 40 hours or less during the previous 60-day period ending when employment starts.  Individuals must complete an IRS form that affirms their previous unemployment.
• Was not hired to replace another employee unless the former employee separated from employment voluntarily or for cause.
• Is not related to the employer and does not own more than 50 percent of the business, either directly or indirectly

Business Credit. An employer can claim a tax credit if the employer retains a qualified worker hired under the HIRE Act for a minimum of 52 consecutive weeks. The credit is equal up to $1,000.  If the employee quits or is fired before the end of the one-year period, no credit is allowed.  To qualify for the full $1,000, the qualified employee must be paid more than $16,129.03.

To qualify, the retained worker:

• Is employed on any date during the tax year;
• Continues to be employed by the employer for a period of not less than 52 consecutive weeks; and
• Receives wages as defined in Code section 3401(a) for such employment during the last 26 weeks of the period that are at least 80% of the wages received during the first 26 weeks of the period.

The act excludes employees who are not normally subject to include tax withholdings such as household employees and some agricultural labor.

For a calendar tax year employer, this credit will be available for 2011. For any other fiscal tax year employer, the credit may be spread over two years, but cannot be used in a tax year beginning prior to the ACT. 

Consult with your tax adviser or accountant to determine if your business qualifies and whether it is advantageous for your business to hire additional employees.  Specific documentation rules and regulations do apply.

Source:  Littler Mendelson, PC.

Document:  HIRE Act Signed into Law – What is Means to Employers.

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