There are two tax incentives to induce businesses to hire, during 2010, individuals who have been unemployed for at least 60 days. The first incentive exempts the employer from the matching 6.2% Social Security payroll tax on a qualifying employee’s wages for the remainder of 2010.
The second incentive is a Retention Credit, available on the employer’s 2011 tax return, for retaining the employee hired in 2010 on payroll for a continuous 52-week period. The Retention Credit is a non-refundable tax credit equal to the lesser of $1,000 or 6.2% of the employee’s wages for the year.
In order to qualify for the retention credit, the employee must be hired before the close of 2010. An unemployed individual is one that certifies they have not been employed more than 40 hours during the 60-day period immediately before their hire date. There is no minimum number of hours that a new employee needs to work in order to qualify, but the employee’s pay in the second 26-week period must be at least 80% of the pay in the first 26-week period. Although an employer cannot claim the new tax breaks for hiring family members, a spouse is not treated as a family member and would be eligible if otherwise qualified. A worker who replaces another employee who performed the same job for the employer won’t qualify the employer for the benefit, unless the prior employee left the job voluntarily or for cause. The benefits can be claimed for rehiring a former worker 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.
For additional information related to these tax benefits and how they might apply to your business, please give this office a call.