New Hire Retention Credit
Would you like a $1,000 credit on this year’s business tax return? Read on to see if you qualify.
The new hire retention credit was part of the HIRE Act that was signed into law on March 18, 2010. In 2010, it allowed for an exemption of the employer portion of social security tax (6.2%) for employees that qualified for the credit.
Employees qualified for the credit by:
1) Being hired after Feb 3, 2010 and before Jan 1, 2011.
2) Certifying that they had not been employed for more than 40 hours during the 60-day period prior to their first day of new employment.
3) Not replacing another employee of the employer (unless the previous employee left voluntarily or was dismissed for just cause).
4) Not being related to the employer.
On 2011 tax returns, a credit can be taken by employers who retained these employees for 52 consecutive weeks. The qualified employee’s wages for the last 26 weeks must equal at least 80% of the wage paid during the first 26 weeks of employment.
The amount of the credit per eligible employee is the lesser of $1,000 or 6.2% of wages paid by the employer to the qualified employee during the 52-week consecutive period.
In order to fill out the required form (Form 5884-B) to calculate this credit, we will need to have the following information: the date the employee began employment, the wages during the first 26 weeks of consecutive employment and the wages during the second 26 weeks of consecutive employment.
The credit cannot be carried back to a prior year and it is non-refundable (except for non-profit organizations). It does not offset business Alternative Minimum Tax.
If you have any additional questions regarding this credit, please do not hesitate to contact our office today!