NEW HIRE RETENTION CREDIT

By Sarah Lau, CPA and Amber Kocher

Did your organization hire any new employees between February 3, 2010 and January 1, 2011?! If the answer is "YES", your organization may qualify for the New Hire Retention Credit of up to $1,000 for each qualified employee. The credit was provided through The Hiring Incentives to Restore Employment (HIRE) Act in conjunction with the payroll tax exemption.

Who Qualifies?

Qualified employers include organizations that hired an individual who was previously unemployed prior to the start of employment. Tax-exempt organizations and public colleges or universities qualify as employers, but the act excludes Federal, state and local government employers.

What are the Prerequisites?

Eligible employees qualify if they began employment with the organization after February 3, 2010 but before January 1, 2011. Each new hire must complete an IRS form W-11, or similar signed affidavit from the new hires certifying they were employed less than 40 hours during the 60 day period before beginning employment.

Manner and Timing of Receiving the Credit:

The new hire retention credit is based on eligible employees with continued employment for at least a year and whose wages were not significantly reduced in the second half of the year.

A general business credit can be claimed on the business income tax return of up to $1,000 for each qualifying employee. For organizations with a June 30th year end, the credit is available on the 2010 990-T for eligible employees hired between February 3, 2010 and June 30, 2010 and on the 2011 990-T for eligible employees hired between July 1, 2010 and December 31, 2010. Calendar year-end organizations are not eligible to report the credit until the 2011 tax return, as the employees would not have been employed for one full year until February 2011, at the earliest.

To learn more about the New Hire Retention Credit, go to www.irs.gov.

If you believe you may qualify, please contact your knowledgeable Blue & Co., LLC tax advisor for more information.