HIRE Act – 5.6 Million Workers Eligible Nationwide

On August 2, 2010, the US Treasury Department released a revised report on estimates of newly hired employees eligible for the HIRE Act Tax Exemption. From previous July estimates, the estimated number of workers nationwide who made their employers eligible for HIRE Act tax credits has risen from 4.5 million to 5.6 million in total. This report includes a state-by-state breakdown of eligible hires, with key states as follows:

• New York – an estimated 339,254 workers have been hired
• Connecticut – an estimated 63,335 workers have been hired
• New Jersey – an estimated 164,952 workers have been hired
• Massachusetts – an estimated 83,954 workers have been hired
• Florida – an estimated 303,809 workers have been hired
• Pennsylvania – an estimated 247,975 workers have been hired

The hiring of 5.6 million new workers under the Act translates to an approximate total tax savings of $10.4 billion this year–and growing – as businesses continue to take advantage of the credit through the end of 2010.

• Under the Act, businesses are eligible for a payroll tax holiday of 6.2% of the payroll tax – essentially an exemption of the employer’s share of Social Security taxes on wages paid to qualified new employees. According to the Treasury report, if the 5.6 million newly hired employees are retained for the remainder of 2010, their respective employers would be eligible for an estimated $6.2 billion in payroll tax savings.
• In conjunction with the Act, businesses may also take advantage of the New Hire Credit which is a $1,000 credit for each new hire employee retained for at least one year. If three quarters of the estimated 5.6 million new hires are employed for 52 consecutive weeks, their employers will receive an additional $4.2 billion in tax credits under the New Hire Credit.

The Act was signed into law in March and went into effect for 2010 second quarter payroll filings. Eligible workers include persons who are hired between February 3, 2010 and January 1, 2011, and had not worked more than 40 total hours in the 60 day period prior to commencing new employment (a signed affidavit is required to qualify). The new employee cannot replace an existing employee and cannot be related to the employer. Workers previously laid off and subsequently rehired are eligible.

The HIRE Act payroll tax exemptions are still available through the end of the 2010 tax year. Legislative leaders are pushing for up to six month extensions for the credits, however the credits are still set to expire December 31, 2010 and businesses should take advantage of the credits as soon as possible.

Please contact your Marcum LLP Tax Professional for further guidance on this and other tax credits that might be available to your business today.