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KSM Blog | Katz, Sapper & Miller CPA

Jobs Bill Signed into Law

Posted 1:24 PM by

The Hiring Incentives to Restore Employment (“HIRE”) Act was signed into law on March 18, 2010. This Act contains provisions that encourage employers to hire those who have been unemployed. The Act also extends enhanced expensing under Code Section 179 for 2010. In addition, there are a number of provisions that are specific to foreign transactions. Below is a brief summary of the main provisions of the HIRE Act.

Payroll Tax Holiday

Effective for wages paid between March 19, 2010 and December 31, 2010 by qualified employers that hire unemployed workers, the employer will not be required to pay the employer's share of FICA, which is 6.2% of wages. The employer will still be required to pay the employer's share of the 1.45% Medicare tax as well as withholding both FICA and Medicare from the employee's wages.

A qualified employer is any employer other than a governmental employer.

An unemployed worker is considered to be a qualified individual if the following are met:

  • Begins employment with a qualified employer after February 3, 2010 and before January 1, 2011.
  • Certifies, by affidavit, under penalties of perjury, that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the individual begins employment with the qualified employer.
  • Isn't employed to replace another employee of the qualified employer unless that other employee separated from employment voluntarily or for cause.
  • Isn't related to the qualified employer.

The payroll tax holiday does not apply for wages paid during the first quarter of 2010. Instead, the reduction will be treated as a payment in the second quarter of 2010.

An employer can elect out of the payroll tax holiday in order to take advantage of the Work Opportunity Tax Credit. If the employer uses the payroll tax holiday, it cannot use those employees' wages for the Work Opportunity Credit.

Retained Worker Credit

For any tax year ending after March 18, 2010, the Act provides up to a $1,000 credit for "retained workers". A retained worker is any qualified worker, as defined under the payroll tax holiday, who:

  • Was employed by the taxpayer on any date during the tax year,
  • Was so employed by the taxpayer for a period of not less than 52 consecutive weeks and,
  • Whose wages for that employment during the last 26 weeks of the period equaled at least 80% of the wages for the first 26 weeks of that period.

The credit is part of the general business credit. The credit is the lesser of $1,000 or 6.2% of the wages paid by the taxpayer to the retained worker during the 52 consecutive week period. The credit is taken in the first year the 52 consecutive week test is met. For example, a calendar year taxpayer can take the credit on its 2011 tax return.

Expensing Election (Section 179)

For 2010, the expensing election under Code Section 179 is $250,000. The deduction starts to become limited when property placed in service reaches $800,000.

Barring any changes, the Code Section 179 limits reverts to $25,000 in 2011 and the deduction starts to phase-out at $200,000 of property placed in service. These amounts will not be adjusted for inflation.

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