Earlier in the week a new article of mine was published on WomenEntrepreneur.com. In the new piece, I explained to readers of the site how to save thousands of dollars by taking advantage of the tax incentives for hiring new employees who were previously unemployed.
The first tax break offsets the employer's portion of Social Security taxes on the new employee's wages from March 19, 2010, to Dec. 31, 2010. So, the 6.2 percent of the employee's wages you would normally contribute to Social Security stays in your business. This does not alter the employee's future Social Security benefits. You are still responsible for withholding the employee's share of payroll and income taxes, and paying the regular Medicare taxes.
The second tax benefit from the HIRE Act allows you to claim a general business tax credit for each new hire still employed after one year, as long as that employee's wages did not significantly decrease over the course of the year. The credit is worth up to $1,000, or 6.2 percent of the employee's total wages, whichever is less. Since you can only claim the credit after the employee completes one full year of service, you would claim the credit on your 2011 tax return. A bit of a delayed benefit, but $1,000 is nothing to sneeze at.
Between these two breaks, you can save thousands of dollars in taxes. Better still, if you need to do a lot of hiring, there is no limit on the number of employees for whom you can claim the credits.
Of course, with anything involving the IRS, there are rules and restrictions. Here is what you need to know: