HIRE & Retention Credit - Under the HIRE Act of 2010, employers who hired qualified employees were eligible for a payroll tax holiday in 2010
A qualified employee for this purpose must have met the following qualifications:
- Was hired after February 3, 2010 and before January 1, 2011.
- Certified that he or she did not work for any employer more than 40 hours during the 60 day period prior to the hire.
- Was not related to the employer in a disqualifying way (child, sibling, etc., or more than 50% owner of the company).
- Did not take the job of an employee who was terminated just to hire a replacement employee for this tax break.
If an employee met all of these qualifications, the employer was relieved of the entire employer share (6.2%) of
Social Security taxes on that employee’s wages paid from March 19, 2010 through December 31, 2010.
New hire retention credit.
The HIRE Act also provides another incentive, the new hire retention credit. The new hire retention credit is a general business credit of up to $1,000 and is available to employers that retain qualified employees.
In addition to the above requirements, a qualified employee for the new hire retention credit must be:
- Retained by the employer for 52 consecutive weeks following the 2010 hire/rehire, and
- Paid wages for the second 26 weeks of the 52 consecutive week period that are at least 80% of the wages paid for the first 26 weeks.
The credit is the smaller of 1) $1,000, or 2) 6.2% of the wages paid during the 52 week period.
For instance, if your employee earned a total of $30,000 for the period April 1, 2010, through March 31, 2011, the credit is $1,000 (the smaller of $1,000 or $1,860 ($30,000 × 6.2%)). The credit is claimed on the tax return for the year in which the 52-week retention requirement is satisfied.
For calendar year employers, the credit will therefore be claimed on the 2011 return.