The Hiring Incentives to Restore Employment Act (HIRE) was signed into law by the President on March 18, 2010. This new law was designed to stimulate employment by extending the section 179 limits and by creating a Payroll Tax Holiday and $1,000 Retained Worker credit. The bill also contains numerous Offshore provisions encourage compliance in reporting foreign income.

Section 179:

For tax years beginning in 2010 the maximum amount that can be expensed is $250,000 and the maximum amount of 179 purchases before reduction is $800,000. These are the same amounts that were allowed for 2009.

Payroll Tax Holiday:

Qualified employers are relieved from the employer share of OASDI tax (6.2%) on newly hired unemployed workers. The worker must be hired after February 3, 2010 and before January 1, 2011.
The relief applies to wages paid after March 18, 2010 and before January 1, 2011.

Workers must sign an affidavit that they have not been employed for more than 40 hours during the 60-day period before employment begins.

An employer who hires someone who could qualify for both the Payroll Tax Holiday and the Work Opportunity Credit must choose between the two. He is not allowed both credits for the same person.

The Payroll Tax Holiday can't be taken for the first quarter. This gives the IRS time to revise the 941's. Otherwise allowable amounts for the first quarter can be claimed in the second quarter.

Retained Worker Credit:

A $1,000 credit can be claimed for each "retained worker." A retained worker is a newly hired unemployed worker (as defined above) who was employed for at least 52 consecutive weeks and whose wages in the last 26 week period is at least 80% of the wages for the first 26 week period.

A calendar year taxpayer will claim the credit on the 2011 return. Fiscal year taxpayers may have to claim the credit over two tax years. Any unused credit cannot be carried back but can be carried over.

Here are some additional features of the new hiring incentive:

• The tax benefit of the new incentive is immediate. It puts money into a business' cash flow immediately, since the tax is simply not collected in the first place.
• The tax benefit generally applies only to private-sector employment, including nonprofit organizations—public sector jobs are generally not eligible for either benefit. However, employment by a public higher education institution would qualify.
• There is no minimum weekly number of hours that the new employee must work for the employer to be eligible, and there is no maximum on the dollar amount of payroll taxes per employer that may be forgiven.
• An employer can't claim the new tax breaks for hiring family members.
• A worker who replaces another employee who performed the same job for the employer is not eligible for the benefit, unless the prior employee left the job voluntarily or for cause.
• For the hiring to qualify, the new hire must sign an affidavit, under penalties of perjury, stating that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employment begins.(New Form W-11)
• The incentive is not biased towards either low-wage or high-wage workers. Under the measure, a business saves 6.2% on both a $40,000 worker and a $90,000 worker.
• The payroll tax holiday does not apply with respect to wages paid during the first calendar quarter of 2010, but the amount by which the Social Security payroll tax would have been reduced under the payroll tax holiday provision during the fist calendar quarter is applied against the tax imposed on the employer for the second calendar quarter of 2010.
• The credit for retaining qualifying new hires is the lesser of $1,000 or 6.2% of the wages paid by the taxpayer to the retained worker during the 52-consecutive-week period. Thus, the credit for a retained worker will be $1,000 if, disregarding rounding, the retained worker's wages during the 52-consecutive-week period exceed $16,129.03. However, the credit is not available for pay not treated as wages under the Code (e.g., remuneration paid to domestic workers).