The Hiring Incentives to Restore Employment (HIRE) Act adds 2 tax benefits for those employers hiring workers who were previously unemployed or only working part time. The employee must not have worked 40 hours during the 60 days before beginning employment with that employer.

First, employers who hire unemployed workers after Feb. 3, 2010 and before Jan. 1, 2011 may qualify for a 6.2-percent payroll tax reduction for those employees for taxes on wages paid to these workers after March 18, 2010. Employers still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes also still applies to these wages.

Second, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

The IRS has revised form 941 so employers may take the credit for the First and Second Quarters on the Quarter 2 form.

They have also come up with a new form, Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit. The W-11 is filed out as proof that the employee is eligible. The employee must certify, under penalty of perjury, the following:

"I certify that I have been unemployed or have not worked for anyone for more than 40 hours during the 60-day period ending on the date I began employment with this employer."

Employers must keep the W-11 on file with their payroll records. They do not submit the form to the IRS.

Bookkeeping Services Group offers full payroll, bookkeeping and proactive tax planning services for small businesses. Please call us for more information about how you can benefit from the HIRE Act.