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New Tax Break for Employers That Hire Unemployed Workers

On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment Act (“HIRE”), which provides a number of tax credits designed to stimulate employment, including one for business that hire unemployed workers. 

Employers of a “qualified employee” are excused from paying the employer’s portion of Social Security taxes on that employee’s wages in 2010. A qualifying employee is one who (a) is hired after February 3, 2010 and before January 1, 2011; (b) does not replace another employee; (c)  is not related to the employer;  and (d) certifies under penalty of perjury that he or she has not been employed for more than 40 hours during the 60-day period ending on the date that employment begins with the new employer.

This incentive can save the employer up to $6,621.60 for each qualified employee hired (6.2% of the maximum Social Security withholding for 2010), with increased savings for hiring qualified veterans, whose maximum Social Security withholding amount is higher. Employers also can receive a tax credit on their 2011 return for each new employee hired and retained for 52 weeks under certain criteria; that credit is the lesser of $1,000 or 6.2% of the wages paid to the employee for those 52 weeks.

The text of the new bill may be found here.

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