Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2% payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2% share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages. This employer exemption expires at the end of 2010 as the law is currently written. For payrolls dated January 1, 2011 and beyond employers will again pay the employers share of social security taxes on wages at the tax rate of 6.2%.
If you have any questions regarding the discontinuation of the Social Security Tax Exemption (Hire Act), please contact your payroll specialist.