Will the recently signed HIRE Act help our economy?
On March 18, 2010 president Obama signed the Hiring Incentives to Restore Employment ( or HIRE) Act into law. The HIRE Act provides two new tax benefits to employers who hire and retain unemployed workers. According to the IRS, “employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010.”
Two notes about this provision:
- Employers will still be responsible for withholding the employee’s portion of their Social Security tax.
- The reduced tax withholding will have no effect on the employee’s future Social Security benefits.
Also, the employer would be eligible for a $1,000 credit per retained worker – if they are retained for at least 52 consecutive weeks. This credit will be claimed on the employer’s 2011 tax return.
Each employer will be required to get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, worked less than a total of 40 hours during the 60-day period. According to the IRS they are currently developing a form employees can use to make the required statement.
This law is expected to have a minimal affect on unemployment – “creating” about 300,000 jobs, according to an optimistic estimate by the Congressional Budget Office (CBO). The bill is slated to cost $18 billion and was passed under the Pay-Go rules – this is where a tax cut or an increase in government spending is offset by a comparable spending cut or tax increase elsewhere. In order to pay for this bill, the IRS is planning to aggressively go after “offshore” tax cheats (something that the agency vowed to do before any talks of the HIRE Act). These efforts were originally a part of the Foreign Account Tax Compliance Act of 2009 (FACTA). Of course this is completely ridiculous and shows that the current administration is not interested in restrained spending (but I’ll save that for a future article).
For more information on taxes click here.
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© 2010, Khaleef Crumbley. All rights reserved.
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