On March 18, 2010, the President signed the Hiring Incentives to Restore Employment (HIRE) Act intended to encourage employers to hire the unemployed. How does this benefit your clients? Well, as national tax instructor (and CPE Link speaker) Vern Hoven says, "You can't base employment decisions on HIRE benefits, but if you are going to add workers, don't leave this money sitting on the table." Vern Hoven answers some common questions regarding the Act:
Question: If you hire an unemployed worker, how long are you able benefit from this program? Answer: The payroll holiday provides an employer reduction from March 18, 2010 through December 31, 2010. The retention credit provides an employer another $1,000 credit after retaining the employee for 52 straight weeks, meaning the credit won’t even start until 2011 and continues for 1 year.
Question: Are people who are receiving current pay checks, under a severance package, deemed to be unemployed when hired by their next employer? Answer: §3111(D)(3)(B) states that a qualified individual means any individual who “...certifies by signed affidavit, under penalties of perjury, that such individual has not been employed for more than 40 hours during the 60-day period ending on the date such individual begins such employment...” Interestingly, the IRS added “or have not worked for anyone” to Form W-11. Neither the Code nor Form W-11 have a limitation as to when the compensation for that work is paid or received. Therefore, it would seem that the receipt of severance pay is not a criteria for being a “qualified individual.”
Question: What if we replace a part-time position with a full time position and hire a new employee . . . does this qualify? Answer: No. The payroll exemption does not apply to wages paid to an employee who is hired to replace an existing worker, unless the existing worker quit work voluntarily or was terminated for cause.
Question: Our firm sent offer letters last fall to college students. They graduate this may and are slated to begin work in September. Even though they accepted the job prior to this law, so long as they meet the w-11 requirements, does our firm qualify for the “tax holiday” and the 52-week retention credit? Answer: Yes. §3111(D)(3)(B) states that a qualified individual means any individual who “...certifies by signed affidavit, under penalties of perjury, that such individual has not been employed for more than 40 hours during the 60-day period ending on the date such individual begins such employment...” If those recent graduates had no summer job in the 60 days prior to going to work for your firm, I would think your firm would qualify.