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February 8, 2012

You May Be Eligible For Tax Credit For Retaining New Hires

February 8, 2012

If your company hired employees in 2010, you may be eligible for a tax credit on your 2011 tax return.

The HIRE Act provides employers with a tax credit for wages paid to retained workers (for tax years ending after the date of passage) who are qualified individuals that:

  1. are employed by the employer on any date during the tax year;
  2. continue to be employed by the employer for a period of not less than 52 consecutive weeks; and,
  3. receive wages for such employment during the last 26 weeks of the period that are equal to at least 80 percent of the wages received during the first 26 weeks of the period.

Qualified individuals are defined as individuals who:

  1. begin work for a qualified employer after Feb. 3, 2010 and before Jan. 1, 2011;
  2. certify by signed affidavit (under penalties of perjury) that they were employed for a total of 40 hours or less during the 60-day period ending on the date the employment begins;
  3. were not employed to replace another employee of the employer unless that former employee separated from employment voluntarily or for cause; and
  4. are not related to the employer.

A qualified employer is any employer other than a federal, state or local employer (or government instrumentality). Public higher education institutions, however, do qualify as qualified employers.

The credit for retained workers is included by increasing the amount of the section 38(b) business credit. The amount of increase is equal to the lesser of:

  1. $1,000; or
  2. 6.2% of the wages paid to the retained worker during the 52 consecutive week period.