Payroll Tax Incentive for Employers

Two new tax benefits have become available to employers who hire workers who were unemployed or working part time.

These new benefits are a part of the Hiring Incentives to Restore Employment Act that was signed into law Thursday.

To qualify for the benefits, employers must hire unemployed workers between February 3rd of 2010 and January 1st of 2011. This could give them a 6.2% payroll tax incentive. The reduced tax will have no effect on the employee's future Social Security benefits and employers would still need to withhold the employee's 6.2% share of Social Security taxes and income taxes. Medicare taxes would still apply to wages.

Additionally, for each unemployed worker retained for at least a year, business may claim an additional general business credit of up to $1000 per worker when filing their 2011 income tax returns.

"These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead," said IRS Commissioner Doug Shulman.