BA Harris LLP

Hiring New Employees and Tax Credits

Published on Wednesday, July 13, 2011

Hiring new employees? Contact Us to See if You Qualify For a Tax Credit

In an effort to stimulate the economy, Idaho and the federal government have both passed tax legislation for businesses that hire new employees prior to December 31, 2013.

Idaho

The Idaho credit is available for new hires on or after April 15, 2011 and before December 31, 2013. The credit is only available to the extent that new hires represent an expanding workforce, (as opposed to replacement of a prior employee), and who receive employer-provided health care benefits. Furthermore, the new employee must receive a minimum level of wages depending on the unemployment figures in the county they are hired in.

The amount of the credit is equal to a percentage of the employee’s wages during their initial 12 months of employment. The credit percentage depends on an employer’s Department of Labor experience rating, ranging from 2% to 6%.

Federal

The federal credit applies to employees who were hired after February 3, 2010 and before January 1, 2011.

To qualify for the credit the employee must be employed for at least 52 weeks and their wages during the second 26 weeks must be at least 80% of their wages from the first 26 weeks. Furthermore, the employee must sign an affidavit stating that they had not been employed for more than 40 hours during the 60-day period ending on the date they began employment. The new employee cannot replace another employee unless the other employee terminated their employment voluntarily or they were terminated for cause.

The federal credit for each new employee is equal to the lesser of $1,000 or 6.2% of their wages.

As is often the case with tax credits, these credits are not a reason to hire new employees but we bring them to your attention so that you are aware of them. They are important to be aware of when considering expansion.

If you believe that you qualify for either of these credits, please contact us to discuss the particulars of your situation. We can assist in determining your eligibility for the credit.

Tyler Nyman, CPA
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