Small Businesses And The Hire Act

The HIRE Act stands for Hiring Incentives to Restore Employment

. This is a new piece of legislation that was signed by President Obama on March 18, 2010. This new $17.5 billion legislation, which has been taken down from $150 billion, affects business in a positive way. For example, it includes tax benefits related to hiring new employees and tax write offs for investments in equipment.

This new legislation now allows employers to be exempt from paying the 6.2% employer social security tax for new employees. The employees, however, must have been hired between February 3 and December 30, 2010. The legislation also allows employers a tax credit of up to $1,000 or 6.2% of the new employee's wage (whichever number is less.)

Rules for the Social Security Tax Exemption include that new employees must have been unemployed or have worked less than 40 hours per week, 60 days prior to employment. The tax exemption only applies to wages earned up to $106,800. If the employee makes more than that, only the first $106,800 is tax exempt. As a safety measure, employers are not allowed to fire employees just so they can replace them with someone who will give them the tax break.

Rules for the Tax Credit include that the employee must sign an affidavit that shows that he or she has not worked more than 40 hours a week, 60 days prior to being hired. Also, as stated before, employers are not allowed to fire other employees just so they can hire someone else who will qualify for the tax break. Wages that the employee earned in the last 26 weeks must be at least 80% of the wages that the employee earned in the first 26 weeks. Furthermore, employers are not allowed to certify for a tax credit under the HIRE Act and the Work Opportunity Tax Credit (WOTC.) The employer must choose one or the other.

Small businesses are affected in a positive way by this legislation because employers will see a reduction in payroll expenses. This act was designed to give employers incentive to hire new employees. The goal of this is to help accelerate the recovery from the latest economic recession by offering jobs to people who otherwise would be unemployed. Small business owners are also able to write off equipment investments of up to $250,000 this year. The goal of this is to stimulate the economy while also allowing small businesses to grow.

by: Rob Barker

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