2010 HIRE Act May Still Benefit You on Your 2011 Returns

Did you hire any new employees during 2010? Were any of these employees considered unemployed or under-employed during the preceding 60 days? If so, you may be eligible to receive a credit on your upcoming tax return for each employee.

As part of the Hiring Incentives to Restore Employment Act (HIRE Act), employers have been granted a credit of up to $1,000 for each qualified employee hired after February 3, 2010 and before January 1, 2011. Besides the required hiring period, each employee must meet several other requirements before being considered a qualified employee. For instance, each employee must have been considered unemployed (i.e. no more than 40 hours of work) during the 60-day period preceding their initial hire date. This must be documented by having each employee sign an affidavit (Form W-11) attesting their unemployment duration.

Furthermore, each employee must also continue to be employed for 52 consecutive weeks. This is why the credit will be taken this year instead of the year when hired. An individual hired after February 3, 2010 will not reach 52 weeks of employment until 2011. For fiscal year taxpayers (those with year ends other than December 31st), this may generate a credit in multiple years, depending on when each employee was hired. For instance, one employee may reach the 52 weeks before the tax year end while another does not reach 52 weeks until after the tax year end.

Lastly, the amount of compensation each employee receives must be consistent. No credit will be allowed if the compensation during the last 26 of the 52 weeks is less than 80% of the first 26 weeks. Otherwise, the employer is eligible to take a credit for each employee equal to the lesser of $1,000 or 6.2% of the 52 week compensation. In any case, the $1,000 maximum credit will be awarded if each employee received over $16,129 during their initial 52 weeks of employment.

If you believe that you may have hired employees that would qualify for the credit, let your accountant know during the preparation of your return. You may also ask for a worksheet which lists all the information needed to calculate the return. The signed W-11 affidavits must also be received before claiming the credit. You should obtain these signed forms from these employees now, if applicable.

Please contact Feeley & Driscoll's Boston Accounting team by Email or call us at 1 (888) 875-9770.

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