Don’t forget about the new employee tax credit

A quick reminder for business owners out there who hired on new employees in 2010: don’t forget that you may qualify for a special tax credit when filing your 2011 tax returns next year.

  • The bottom line: Businesses can get a tax credit for new workers hired between 2/3/10 and 12/31/10, who were retained on payroll for at least 52 weeks. The amount of the credit is the lesser of $1,000, or 6.2% of wages during the 52-week period.

  • The qualifiers: The new hire must not be (a) Employed more than 40 hours in the 60 days prior to their hire date (and signs an affidavit, like the Form W-11), (b) Replacing an existing employee, unless the separation was voluntary or for cause, (c) Related to the employer as family or more than 50% owner, (d) Paid wages during the last 26-weeks, that are less than 80% of the first 26-weeks, nor (e) Agricultural labor. (Simple enough, right?) ;)

  • The claim: The credit will generally be taken on the 2011 income tax return (since that is when the 52-week period will have been met), and is calculated on Form 5884-B.

$1,000 is certainly a nice boost, so be sure you’ve collected your employee affidavits, and don’t forget to make a note in the file for tax time. As always, feel free to contact us if you have any questions along the way!

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