Tax Credits for Hiring New Employees
Companies that hire new employees may be eligible for two new tax incentives ? both of which came into play under the HIRE Act that was signed into law in March of 2010.
To start, when a company hires a new employee they will not have to pay his or her Social Security Tax from the hire date to the end of 2010.
Along with the above savings, companies that retain a new employee for a period of 52 consecutive weeks may qualify for a tax credit up to $1,000. This is known as the New Hire Retention Tax Credit.
Eligibility requirements for this tax credit include: the hire must be a new employee, job must be held for 52 consecutive weeks, employment must begin before January 1, 2011, unemployed for at least 60 days leading up to the hire, and not a family member of the business owner.
Of course, these tax credits and breaks have some strings attached. Most notably, they are only available for new hires that have been out of work for at least 60 days before starting their new position.
What about the Work Opportunity Tax Credit (WOTC)? This is one that many companies are aware of, and unfortunately, a large number of eligible organizations never take advantage of the tax credit. This is an incentive, provided by Congress, which allows private sector businesses to receive a tax credit for hiring people from 12 groups who have historically faced employment barriers.
The Work Opportunity Tax Credit can be as much as $1,200 for summer youth hires, $2,400 for a new adult hire, $4,800 per disabled veteran hire, and $9,000 per TANF recipient.
The biggest benefit of the Work Opportunity Tax Credit is that many companies are able to participate. To get involved, the company must make the hiring decision without outside help. To take advantage of the tax credit, a minimal amount of paperwork is required. On top of this, and most importantly, there is no cap on the number of people who qualify for this tax credit.
As you can see, the government is serious about improving employment numbers while helping companies save money along the way. The HIRE Act has gone a long way in making strides in this area. The same holds true for other programs and tax credits, such as the Work Opportunity Tax Credit.
Companies of all sizes are eligible for tax credits for hiring. It is important to be aware of these credits at the time of hiring and during tax season.