Tax Law Expert Robert Wood---Hire Tax Credit

Tax law Expert Robert Wood discusses the HIRE Tax Credit.

Employers don’t have long—only until December 31, 2010—to hire new employees and get a double tax benefit:

1. An exemption from the employer’s 6.2% share of Social Security tax; and

2. A $1,000 per employee federal income tax credit.

They come courtesy of the HIRE Act.  For more details, see Hire By Year-End For Tax Breaks.

But what if there’s a temporary interruption of employment? Can a “new” (but actually not so new) hire still qualify?  It depends.

Temporary Absence.  The IRS ruled in Information Letter 2010-0198 that someone already a qualified employee who experiences a short term or temporary interruption in work continues to be qualified unless the interruption is a termination of employment.  Whether it is a termination depends on the facts and circumstances.  If the worker’s employment is terminated, he will have to (again) meet qualified employee requirements when rehired.  See HIRE Act: Questions and Answers for Employers.

Fire Then Hire.  For a former employee to qualify, his employment must be terminated so he can begin employment after February 3, 2010 and before January 1, 2011.  Plus, he must be employed for less than 40 hours during the prior 60 days.  The former employee cannot re-qualify unless he hasn’t been employed for more than 40 hours during the preceding 60-day period.

To qualify, hires must:

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