Who Is an Eligible Hire for the Latest Employer Tax Incentives?

Do your clients know who is considered an eligible hire for the latest employer tax incentives?

June 14, 2010
by Heidi Parton, and Compliance and Marketing Divisions, Paychex, Inc.

The Hiring Incentives to Restore Employment (HIRE) Act may include opportunities for your firm and your clients — if a “qualified individual” is hired. The incentives include the following:

  • Social Security Tax Forgiveness — The HIRE Act will exempt an employer from paying the employer portion of social security taxes for the remainder of the year on new hires who are currently unemployed.
  • Business Tax Credit for Retention — If those workers stay on the payroll for at least a year, the employer would also get up to a $1,000 business tax credit per employee.

What Employees Are Eligible?

A “qualified individual” is considered an eligible hire for the tax credits and meets all of the following requirements:

  • Employment with a qualified employer begins after February 3, 2010 and before January 1, 2011.
  • Has NOT been employed for more than a total of 40 hours during the previous 60 days. The individual must sign an affidavit attesting to the employer that this is true.
  • Is hired into a new position or replaces another employee, only if the previous employee separated from employment voluntarily or for cause.
  • Is not a family member of the business owner, nor a household or government employee.

Common Questions

Provided below are common questions related to qualified individual determination:

Q:  Do new hires have to work a minimum number of hours to qualify?
A:  No. There is no minimum or maximum number of hours an employee has to work to get the payroll tax exemption, as long as the new hire meets the above requirements of a qualified individual. In addition, it does not matter if the employee works full or part-time.

Q:  Does the Social Security tax exemption apply to wages paid to a seasonal employee who was previously laid-off and then rehired by the same or related employer?
A:  Yes, if the employee meets the above requirements of a qualified individual.

Q:  If a business uses the services of workers who are employees of a temporary agency, can the temporary agency claim the payroll tax exemption for its qualified employee working at a client’s business?
A:  Yes. The temporary agency can apply the exemption with respect to a qualified employee of the temporary agency. This is determined based on when the employee begins work with the temporary agency — not its client.

Q:  If an employer hires a high school, college or graduate student who has been in school for some or all of the 60 days preceding the start of his employment, does the social security tax exemption apply to wages paid to the employee?
A:  Yes, if the employee meets the above requirements of a qualified individual. It is not necessary for the individual to have been previously employed and have lost his job to be qualified. There is also no minimum age requirement for the HIRE Act, but the employer must be in compliance with state and federal child labor laws.

Additional details regarding qualified employers and individuals and the new HIRE Act can be found at www.irs.gov.

Resources to Count ON!
To stay continuously informed on other details regarding qualified individuals, and all the latest on the HIRE Act legislation, visit www.paychex.com/hireact. Tools include:

  • HIRE Act calculator to estimate possible savings
  • FREE HIRE Act recorded webinar
  • Customizable client informational piece
  • Commonly Asked Questions about the HIRE Act

Paychex is proud to be the exclusive provider of retirement services for the firm-based AICPA Member Retirement Program, and preferred provider of payroll and retirement plan services for CPAs through the AICPA Business Solutions Partner Program.

The material contained above is current only as of the date of publication. These materials are for informational purposes only. They are not legal advice and should not be relied on as such. You should contact your attorney to obtain advice with respect to any particular issue or problem.