A New Hire Tax Credit

The IRS tends to release some great indi­vid­ual tax cred­its — take the new homeowner’s credit now on it’s third revi­sion.  Most often, the new busi­ness cred­its are hard to take full advan­tage of for small busi­nesses.  How­ever, there is a new tax credit out and the IRS has released the nec­es­sary forms to apply for the credit.  Most impres­sive is the abil­ity for many small busi­ness to take advan­tage of the credit.  Here’s the basics.

If you hire some­one after Feb­ru­ary 3, 2010 that has been unem­ployed, or essen­tially unem­ployed for the 60 days prior to their hire date with you, then you qual­ify for a credit under the HIRE Act.  For these qual­i­fy­ing employ­ees, you will receive a credit of your por­tion of their FICA tax through 12/31/2010.  This is the 6.2% you pay on their gross wages and does not include the medicare por­tion.  To see if you qual­ify for the credit and to pro­vide the doc­u­men­ta­tion for your pay­roll provider, use IRS Form W-11 from the IRS web site.

Let’s say you hire some­one in April that qual­i­fies and will pay them $25,000 for the remain­der of the year.  This credit will save you $1,550 or 6.2% of $25,000.  Not only that, but there is another credit you can claim on your busi­ness tax return at year end.  You can find out more about that credit from your CPA!

They’ve done it!  Here’s a great oppor­tu­nity if you are think­ing of hir­ing dur­ing 2010.