PAYROLL TAX BREAKS IN ‘HIRE ACT’

Dear friends of RC Jones & Associates

The new Hiring Incentives to Restore Employment Act (HIRE) Act of 2010 provides two key payroll tax breaks for employers who hire new employees.

Payroll tax break #1: Normally, an employer must pay the 6.2% Social Security tax portion of the FICA tax on an employee's wages up to a specified annual amount ($106,800 for 2010). The 1.45% Medicare tax portion of the FICA tax applies to all wages.

But the new law waives the Social Security tax liability for wages paid to qualified employees from March 19, 2010, through Dec. 31, 2010. A "qualified employee" is one who starts work for the company after Feb. 3, 2010, and before Jan. 1, 2011; has not been employed for more than 40 hours during the previous 60 days; was not hired just to replace another employee (unless the former employee separated from employment voluntarily or for cause); is not related to the employer; and does not own, either directly or indirectly, more than 50% of the employer.

Payroll tax break #2: In addition to the payroll tax exemption for hiring qualified employees, an employer can secure a tax credit for keeping these workers employed for at least 52 consecutive weeks. Each credit, which is added to the general business credit, equals the lesser of $1,000 or 6.2% of the wages paid to the worker during the 52-week period.

Of course, this is only a brief overview of these two new tax breaks. If you need more details about the HIRE Act rules, please do not hesitate to call our office at (816) 792-9966. One of our experienced staff members will be glad to assist you.


Very truly yours,
Robert C. Jones

www.rcjonesinc.com