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New Hire Retention Credit

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The 2010 HIRE Act included a tax credit for retaining workers. This credit may apply to businesses and nonprofit entities for 2011. The credit equals the lesser of $1,000 or 6.2% of the wages of each retained worker.

A retained worker is an employee that meets all of the following conditions:

1. The employee was hired after February 3, 2010 and before January 1, 2011.
2. Before being hired the employee certified that they were not employed for more than 40 hours during the sixty day period ending on the date they were hired.
3. They were not employed to replace another employee unless the employee separated from employment voluntarily or for cause.
4. The employee must work for 52 consecutive weeks after being hired.
5. The wages of the employee during the employee's second 26 weeks of work must be at least equal to 80% of the wages in the first 26 weeks of work.

Note: Workers that qualified for the reduction in payroll taxes for a portion of the employer's share of FICA tax in 2010 will qualify for this credit as long as they also meet the requirements of numbers 4 & 5 (above).

Certain employees related to the employer do not qualify for the credit, nor does the credit apply to household employees.

The credit will not apply to the employee until the year the employee has completed 52 consecutive weeks of employment.

If you would like more information concerning the new hire retention credit, please contact an SVA professional.