Hireact presentation

© 2010 Paychex, Inc. All rights reserved.

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The 2010 HIRE ACT

The information in these materials, and that provided by the presenter, should not be considered legal or

accounting advice, and it should not substitute for legal, accounting, and other professional advice where the

facts and circumstances warrant. It is provided for informational purposes only.

If you require legal or accounting advice, or need other professional assistance, you should always consult

your licensed attorney, accountant, or other federally licensed tax professional to discuss your particular

facts, circumstances, and business needs.


Today’s Objectives

Discuss the cornerstone of the HIRE Act that will provide employers with incentives to hire and retain employees.

Review two key provisions: Social Security Forgiveness and Business Credit for Retention.

Review and discuss qualified employers and employees.

Discuss how the new payroll exemption may impact liability, tax deposits and reporting.

Review changes to payroll tax returns and reporting.

Highlight most recent IRS guidelines.


HIRE Act Overview

The HIRE Act was signed into law on March 18, 2010 with an overall intent to encourage hiring and help small business owners.

The bill includes $17.5 billion that will:

extend the Section 179 deduction for equipment expenses.

reform municipal bonds to expand investment in schools and clean energy.

extend highway and mass transit programs through the end of the year.

provide payroll and business tax incentives for businesses that hire the unemployed.


Key Provisions

Social Security Forgiveness

Exempts an employer from paying the employer portion of Social Security taxes (6.2%), up to the social security wage base, for the remainder of the year on new hires who are currently unemployed.

Business Credit for Retention

If workers stay on the payroll for at least a year, the employer would also get up to a $1,000 business tax credit per employee.


Social Security Tax Forgiveness:

Qualified Employers

Must be in a trade or business.

Tax exempt organizations qualify.

Applies to employers in the U.S., District of Columbia, U.S. territories and possessions including Puerto Rico and U.S. Virgin Islands.

Government entities are excluded except for public institutions of higher education.

May elect not to take the social security employer tax credit.


Social Security Tax Forgiveness

The 6.2% employer portion of the Social Security tax

would be exempt for any qualified individual hired after

February 3, 2010 and before January 1, 2011.

For wages paid between March 19, 2010 and

December 31, 2010 up to the $106,800 Social Security

wage base.

There is no limit to the total number of hires during this

period.


Social Security Tax Forgiveness:

Qualified Individual

Employed by a qualified employer after February 3, 2010, but

before January 1, 2011.

Has NOT been employed for more than a total of 40 hours

during the previous 60 days.

Can be hired into a new position, or may replace another

employee, only if the previous employee separated from

employment voluntarily or for cause.

Is not a family member of the business owner.

Is not a household or government employee.

Must sign an affidavit attesting to the employer that he was not

employed for more than 40 hours over the previous 60 days.

New IRS Form W-11, Hiring Incentives to Restore Employment

(HIRE) Act Employee Affidavit, may be used.


Form W-11, Hiring Incentives to Restore Employment

(HIRE) Act Employee Affidavit


Common Questions Related to Qualified

Individual Determination

Minimum hours worked.

Full-time or part-time.

New hires for a new start up business may be eligible.

Laid off workers.

Seasonal employees.

High school, college, and graduate students.


Minimum hours worked.

Full-time or part-time.

New hires for a new start up business may be eligible.

Laid off workers.

Seasonal employees.

High school, college, and graduate students.

Common Questions Related to Qualified

Individual Determination



Potential Impact

An employer can save up to $6,622 in employer Social

Security tax for each qualified hire.

No limit to the total new hires.



Sample Potential Impact

Employee start date is March 1, 2010.

Paid $500 weekly.

$500 x 6.2% = $ 31

$31 x 41 weeks = $1,271 potential savings


Social Security Tax Forgiveness and the

Work Opportunity Tax Credit (WOTC)

The Social Security tax exemption can not be taken in

conjunction with the Work Opportunity Tax Credit

(WOTC).

Social Security tax exemption credit vs. WOTC –

Employer needs to make a choice.

If the employer begins to take the reduced Social

Security tax on a qualified employee, then the wages

paid to that individual would not be taken into account

for the WOTC.


Receiving the Exemption

Claim as a credit at end of the quarter on Form 941.

Reduce federal tax liability through out the quarter.

Claiming the tax credit begins with second quarter Form 941.

First quarter qualified exempt wages and credit are reported on second quarter Form 941.

Tax Liability, Deposits, and Quarterly Filing


Reporting and Form Modifications

The Form 941 is being updated to account for the tax credits beginning with the second quarter form.

First quarter wages and credits will also be reported on the second quarter form as a separate line item.

The Schedule B will be impacted, but the form is not being modified. Liability and deposits will be reduced.

Forms 944 & 943 is expected to closely mirror Form 941.

Form W-2 and Form W-3 being modified to include a new box 12 code of “CC” to report exempt wages and tips for qualified employees.

Tax Liability, Deposits, and Quarterly Filing


Business Credit for Retained Worker

General business credit to encourage the retention of new hires.

Qualified individual must be employed for 52 consecutive weeks.

Wages paid during the previous 26 weeks must equal at least 80% of wages during the first 26 weeks of employment.

Lesser of $1,000 or 6.2 percent of the wages paid during the 52 consecutive week retention period.

Taken on the employer’s 2011 business tax return.

May not carry back any portion to previous years but may be carried forward.

Interaction with WOTC – to be determined.


Potential Tax Savings

Employee start date is March 1, 2010.

Paid $500 weekly.

Employer’s Social Security Calculation Savings

$500 X 6.2% = $ 31

$31 X 41 weeks = $1,271 $1,271

Business Tax Credit Calculation Savings

$31 X 52 weeks = $1,612 $1,000

Total Potential Tax Savings $2,271


For more information call Cindy Colgan at

315-882-4391

Summary


Paychex offers solutions specifically designed to help businesses

easily manage and comply with the following provisions of the

HIRE Act:

Social Security Tax Exemption

identify and track qualified employees, contingent upon

receipt of a copy of the new IRS Form W-11, Hiring

Incentives to Restore Employment (HIRE) Act Employee

Affidavit, provided by employers.

Identify and report social security exempt wages on the

new IRS Form 941 and provide proper reporting on

Form W-2.

Federal tax liability will be reduced on a per-pay-period

basis throughout the quarter by the eligible employer

social security tax amount, reflecting true employer

expense.

How Can Paychex Help?


Paychex: www.paychex.com/hireact

For the latest on the IRS details and how the HIRE

legislation may affect your business.

Use our HIRE Act calculator to estimate possible

HIRE Act savings.

HIRE Act Resources


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Hireact presentation

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