As was expected, today President Obama signed the most recent jobs bill passed by Congress, the Hiring Incentives to Restore Employment (HIRE) Act. While many businesses are hesitant about hiring new employees within the current economic climate, "this jobs bill should help make their decision that much easier," President Obama said during the bill signing.

While I am happy to see some effort being made to help small businesses let us be sure to keep this HIRE Act in perspective. First, unless you were already considering hiring another employee the Act is not going to offer you enough hard dollar incentive to make a hire. For example, if you were to hire a qualified previously unemployed worker and pay her $30,000 this year your tax savings would amount to $1,860. Plus, if you kept her on the payroll for a full 52 weeks you would also get a tax credit of $1,000. Your total potential savings is $2,860. You can see that while nice to have, it is not likely these tax breaks by themselves will create much hiring. But, for all you business owners out there currently debating whether you need to add staff, this just might help you pull the trigger and make the hire.

Second, if small businesses do not have enough cash available to hire these unemployed workers it really makes no difference what the tax savings on that $30,000 might be. What would have been particularly interesting would have been some type of provision to help make small business loans more abundant for deserving businesses being tied to the HIRE Act making funding of these new jobs available.

With that said, here is information about the new HIRE Act. The Act creates two new tax benefits for businesses hiring workers who were previously unemployed or only working part time.

Pay eligible employees without paying the employer-side Social Security tax

Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after the date of enactment. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

After a year get an additional $1,000 credit

In addition, for each new employee retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file 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.

The tax breaks sure don’t hurt, as for a boost, we will just have to wait and see.

The two tax benefits are especially helpful to businesses who are already adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.

In addition, the new law requires that the business get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.

Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit so your nanny or gardener won’t count.

You will claim the payroll tax benefit on your federal employment tax return you file, usually quarterly, with the IRS. Eligible businesses will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. Revised forms and further details on these two new tax provisions will be posted on IRS.gov during the next few weeks. You can also check back here for the details as they become available.

There are other provisions with in the hundreds of pages of the Act and supporting documents including equipment expensing, etc. Stay tuned as we unwrap this supposed government gift.

Why not close this discussion with the never-to-be-humble words of the Senate Finance Committee Chairman. I will leave it to you as to just accurate his comment may turn out to be.

"The bill we passed today is a targeted approach designed to get Americans back to work right away by creating jobs to rebuild our country's infrastructure and providing tax cuts for businesses to hire new workers," commented Senate Finance Committee Chairman Max Baucus following the vote.

Free, No-Obligation Consultation

I would be honored to chat with you about your accounting, tax and finances whether personal or business. I offer a Free, No-Obligation consultation (at your place or mine). During our meeting we will discuss your concerns and questions and let you know how we can help you and our costs. My consultations are not just sales pitches, I will offer you some solid ideas and solutions to help you right off the bat. To schedule a consultation at a time convenient for you, call me at any of offices or call me toll-free at (888) 758-5966 or click here to email me.

I hope you found this information useful. I am excited by the fact that my practice is growing. The key to my firm’s growth — and probably your business too — is referrals from satisfied clients, customers and friends like you. If you know of a friend, colleague or business that would like to grow with us please let me know.