On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment Act (HIRE). Of most immediate significance for employers is an exemption from paying the employer's share of social security taxes for qualifying new hires. The Act applies to private employers, including nonprofits, and qualifying public universities and colleges. Specifically, the New Hire Act exempts a qualifying employer from paying the employer's share of social security taxes for a new hire (1) who "begins employment" after February 3, 2010, and before January 1, 2011, and (2) who certifies that he or she has not worked more than 40 hours in the past 60 days. This exemption saves the employer from paying its 6.2% share of the social security payroll tax for the remainder of 2010. An employer could save up to $6,621 if it hired an unemployed worker and paid that worker in 2010 at least $106,800 -the cap on wages subject to social security taxes. The exemption, moreover, contains no cap or limit on the nu umber of new hires that qualify.
The exemption actually starts with the second quarter of 2010. First-quarter payroll taxes on n wages subject to the exemption are recouped through an offset to second-quarter payroll taxes. The New Hire Act does not change other payroll taxes, so the employer must continue to deduct the worker's share of social security taxes and the employer's and worker's 1.45% Medicare tax. The new Hire Act also allows an increase in the general business tax credit for an employee (1) who is hired in this same period (after February 3, 2010, and before January 1, 2011), (2) who is continuously employed for 52 weeks, and (3) whose wages during the final 26 weeks are at least 80% of his or her wages for the first 26 weeks. The tax credit is the lesser of: (1) $1,000 or (2) 6.2% of the wages the employer paid to retain the employee for the 52 weeks. The new Hire Act also applies to some replacement hires, but only if the replaced employee voluntarily resigned or was terminated for cause. An employer therefore cannot terminate and then rehire its workforce just to take advantage of the tax credit. The Act requires that the employee must certify that he or she has not worked more than 40 hours in the past 60 days. The IRS has created a form for employee certification to meet the Act's requirements. The form (W-11) can be located at the IRS website, www.irs.gov/pub/irs-pdf/fw11.pdf. Code Section 179 Revisions under the (HIRE) Act
Under IRC §179, businesses can elect to recover all or part of the cost of qualifying property, up to a limit, by deducting it in the year it is placed in service. Before HIRE, IRC §179 expensing was limited to $125,000 with a $500,000 limit for new capital asset additions. HIRE raises the dollar limit to $250,000 in first year expensing, with a limit of $800,000 for new capital asset additions. Once assets additions exceed the $800,000 limit, the phase-out rules apply and the $250,000 expensing limit will be completely phased out once additions reach $1,050,000. The HIRE Act applies to qualified asset purchases made in tax years beginning after December 31, 2009 and before January 1, 2011. HIRE also provides that off-the-shelf computer software (i.e. software that can be purchased in most stores or online Internet purchases) qualifies for the expense election of IRC §179. The above was provided by GBP&B Tax and Business Services, 1150 Palm Street, San Luis Obispo, CA 93401, (805) 544-1441
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