FAQs About the Credit
(07/23/10) Q1: What is the new hire retention credit and what does it apply to?
A1: This is a general business credit to encourage retention of new hires (retained workers). The employer may claim the credit for each retained worker. A retained worker is a qualified employee (as defined for purposes of the payroll tax exemption) who remains an employee for at least 52 consecutive weeks, and whose wages (as defined for income tax withholding purposes) for the last 26 weeks equal at least 80% of the wages for the first 26 weeks. The amount of the credit is the lesser of $1,000 or 6.2% of wages (as defined for income tax withholding purposes) paid by the employer to the retained worker during the 52 consecutive week period.
(07/23/10) Q2: If an employer chooses to claim the WOTC for a qualified employee, can the employer still claim the new hire retention credit for that qualified employee?
A2: Yes, an employer may claim the retention credit for a qualified employee even if the employer has also claimed the WOTC for the same employee.
The new hire retention credit can be claimed for any qualified employee, as defined for purposes of the payroll tax exemption, once the employee is employed for 52 consecutive weeks, so long as the employee's wages (as defined for income tax withholding purposes) for the last 26 weeks of employment equal at least 80% of the employee's wages for the first 26 weeks of employment.
(07/23/10) Q3: For what years can an employer claim the new hire retention credit with respect to a retained worker?
A3: The credit may be claimed for a retained worker for the first taxable year ending after March 18, 2010 (the date of enactment of the HIRE Act), for which the retained worker satisfies the 52 consecutive week requirement. However, since retained workers must be qualified employees, the credit applies only for workers hired after February 3, 2010, and before January 1, 2011.
Calendar Taxpayers - Calendar year taxpayers are not eligible to claim the New Hire Retention Credit (Form 5884-B) on their 2010 tax returns due to the 52 week retention period. As a result, calendar year taxpayers are first eligible to claim the credit on their 2011 tax returns due April 15, 2012.
Fiscal Year Taxpayers - For fiscal year filers, the earliest date to file a return claiming the credit would be fiscal years ending after February 3, 2011.
(07/23/10) Q4: Can a business carry back any portion of the new hire retention credit to use against a tax liability for years beginning before March 18, 2010, the date of enactment of the HIRE Act?
A4: No, the portion of the general business credit attributable to the new hire retention credit cannot be carried back to a taxable year that begins before March 18, 2010.
(07/23/10) Q5: Can the new hire retention credit offset the business Alternative Minimum Tax?
A5: No, the new hire retention credit cannot be used to offset the business Alternative Minimum Tax.
(07/23/10) Q6: Will the business deduction for compensation be reduced and or affected by the new hire retention credit?
- Business Credit for Retention of Certain Newly Hired Individuals in 2010
- HIRE Act: Questions and Answers for Employers