President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act (aka Jobs Bill) into law on Thursday, March 18, 2010. The HIRE Act is focused on accelerating the hiring of unemployed workers. You have two opportunities for tax credits with this new law:
* Social Security Tax Exemption - Employers who hire unemployed workers this year (after February 3, 2010 and through December 31, 2010) may qualify for a 6.2-percent 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-percent share of Social Security taxes, as well as income taxes. The employer and employees' shares of Medicare taxes would also still apply to these wages.
* Tax Credit* - In addition, for each worker retained for at least a year, businesses may claim a general business tax credit, up to $1,000 per worker, when they file their 2011 corporate income tax returns (form 1120). The employee must be hired after February 3, 2010 and be employed for at least 52 consecutive weeks. Wages during the last 26 weeks must be at least 80 percent of the wages paid for the first 26 weeks. *Since this is related to income tax, Paycor does not apply this credit.
How long will these credits be in place?
Currently, the credit is available for new hires made between February 3, 2010 and December 31, 2010. All credits must be applied to 2010 check dates.
What is the maximum credit for the Social Security Tax Exemption?
The maximum credit for each employee is $6,621.60 (Social Security wage max $106,800 x 6.2%).
Where can I learn more about the HIRE Act?
What is Paycor doing to help you?
Paycor will calculate the Social Security Tax Exemption credit effective April 1, 2010 on each eligible new hire along with the payroll. Click here for a worksheet to help you track your eligible employees. For payrolls with check dates of March 19, 2010 to March 31, 2010, Paycor will apply the credits as an adjustment run in early April. We will also provide you with reports to help you track these credits. Reports include Payroll Journal, Cash Requirement, GL and a new zzSOCER Exemption Credit report. We will continue to keep you informed as new legislation is introduced or changed.
Which employees are eligible for the Social Security Tax Exemption
An employee is eligible if he/she:
- Begins employment between February 3, 2010 and December 31, 2010. Additionally, only the wages earned with a check date of March 19, 2010 to December 31, 2010 are eligible for the credit.
- Has not been employed for more than 40 hours during the previous 60 days. The individual must sign an affidavit attesting to the employer this fact. A sample affidavit can be view here.
- Is not hired to replace another employee unless the previous employee was separated from employment voluntarily or for cause. Additional restrictions may apply for seasonal employment. Details can be found at www.IRS.gov.
When can I begin applying for the Social Security Tax Exemption
Paycor has already updated its global tax table with the zzSOCER tax code effective April 1, 2010. Paycor will contact you with information on how to set up eligible employees in your payroll application. In the meantime, continue tracking your employees on the ZZSOCER Credit Worksheet. Payrolls with April 1, 2010 check dates will be calculated with this new code and the credit will be applied immediately along with the payroll. Check dates of March 19, 2010-March 31, 2010 will be handled as adjustments and coordinated with you separately.
How will new hires in February and March be handled? How can I claim a
credit for 1st quarter?
Assuming the employee received wages with a check date on or after March 19, 2010, these credits will be applied in April as an adjustment (check date April 1, 2010 or later). We ask that you complete the ZZSOCER Credit Worksheet to notify us of the eligible employees.
What’s next from the government?
Paycor continues to work closely with IRS. Requirements could change as the law is subject to interpretation. We will continue to keep you up to date on this page as there could be additional legislation or changes to existing legislation.
Where do I go for help?
You can contact your payroll specialist or email email@example.com.
Your tax professionals at Paycor continue to monitor these and other potential changes that affect your payroll. You have our assurance that our systems will be updated to ensure your compliance anytime new payroll and tax changes are introduced. We also will keep you informed as changes are announced or become effective.
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