Daycare Tax Tips

2010 Federal HIRE Act

Incentives for hiring unemployed workers

The recently passed Federal Hiring Incentives to Restore Employment (HIRE) Act lets employers skip their 6.2% contribution to social security for previously unemployed workers who begin employment after February 3, 2010 and before January 1, 2011. The employer's portion of social security taxes is forgiven for wages paid from March 19, 2010 through December 31, 2010.

The main employee qualification is that they must have either been unemployed or employed for less than 40 hours during the 60-day period ending on the date their new employment began. The employee must certify this with a signed Form W-11 affidavit.

The good news for family child care providers is that part-time employees do qualify, though family employees do not. The payroll tax exemption does not apply to wages paid to an employee who is hired to replace an existing worker, unless the existing worker terminated employment voluntarily or was terminated for cause.

The HIRE Act also allows for a general business credit of up to $1,000 to encourage retention of the new hires. The employer may claim the credit for each qualified employee who remains an employee for 52 consecutive weeks, provided that the employee’s pay does not decrease significantly in the second half of the year. The amount of the credit is the lesser of $1,000 or 6.2% of wages paid by the employer to the retained qualified employee during the 52 consecutive week period.

Last updated on 1 August 2010

Posted on 2010-04-20 04:09:28