Two new tax benefits aid employers who hire and retain unemployed workers

Editor’s note: This article is from the archives of the MSU Crop Advisory Team Alerts. Check the label of any pesticide referenced to ensure your use is included.

Editor’s note: The following was submitted by Thomas Dudek, Senior Extension District Horticulture and Marketing Educator. Reprinted from the spring 2010 TelFarm Newsletter.

The Hire Incentives to Restore Employment (HIRE) Act added some tax incentives.

Employers who hire unemployed workers this year (after February 3, 2010 and before January 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes (1.45 percent each) would also still apply to these wages. Family members and other relatives do not qualify.

In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

The new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked less than a total of 40 hours for someone else during the 60-day period. A new IRS Form W-11 may be signed by new hires to make the required statement.

Agricultural employers qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit. Revised forms (943) and further details on these two new tax provisions will be posted on IRS.gov when available.

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