Tax Credits for New Hires
During the State of the Union Address, President Obama announced his support for legislation to provide a tax credit for companies that hire additional employees.
The tax credit for new hires will likely focus on small businesses. It is expected that there will be safeguards placed in the bill to prevent companies from hiring an employee and then laying the employee off after the employer receives the tax credit. Similar legislation was discussed in 2009, but no action was taken by Congress.
Sources say legislation currently being worked on by Senate Democrats is likely to provide a 20 percent tax credit for companies with fewer than 100 employees that hire a new employee, and a 15 percent tax credit for larger companies. The amount of tax credits any one company could receive would be capped at $350,000. The Senate could consider this proposal in the upcoming weeks.
Another option being discussed is a proposal by Senators Charles Schumer (D-NY) and Orrin Hatch (R-UT) that would waive the Social Security payroll tax for any employer that hires a new employee in 2010, and offering an additional $1,000 tax credit in 2011 if the employee is kept on the payroll for 52 continuous weeks. This proposal would apply to private sector employees only and any employer who had a lower total payroll in 2010 than it had in 2009 would have to forfeit the tax benefit.
