Hiring Incentives - HIRE Act - Retention Credit

What is it? - A tax credit you get if a qualified employee you hired work for you for at least 52 consecutive weeks. The credit is equal to the lesser of $1,000 or 6.2% of the worker's wages during the 52-week period.

When do I qualify? - You gain this benefit if

• You had hired an employee who qualified you for the exemption from the social security tax as described in Exemption from Social Security Taxes on this page and
• His or her wages for the last 26 weeks of the 52-week period were at least 80% of the wages for the first 26 weeks of the period.

How do I qualify? - Just keep track of your qualified employees and their compensation. Because the wages for the second half of the period must be at least 80% of the wages is the first half, you will not only need to track the employee's compensation rate, but also the other factors that impact total compensation, such as hours worked. You need to ensure your payroll system can identify and track these employees.

What else do I need to know? - This credit is part of the general business credit. Any unused credit can be carried forward to future years.

Because the credit is limited to $1,000 per employee, you might qualify for a higher credit by, for example, hiring two half-time employees rather than one full-time employee. In this way, you could end up with $2,000 in credit rather than $1,000. However, any employee must stay with you at least 52 weeks for you to qualify, and a part-timer may be more apt to leave.

Since the credit requires a qualified employee to work 52 weeks before you are eligible to claim it and a qualified employee is one hired after February 3, 2010, it won't apply until 2011.

Who should I contact for more information? - Contact your BB professional or Ted Stacey (teds@bb-cpa.com) or Ken Franz (Kenf@bb-cpa.com) in our New Orleans office.