Working with 5-Payroll > 5-2 Payroll Processing > 5-2-1 Employees > HIRE Act

HIRE Act

Businesses that hire new employees may qualify for two tax incentives under the Hiring Incentives to Restore Employment (HIRE) Act. This new tax law was signed into law on March 18, 2010. Businesses that hire new employees will not have to pay the employer's share of Social Security tax (6.2% of wages) from the date of hire through the end of 2010.

Additionally, businesses that retain a newly hired employee for at least 52 consecutive weeks can qualify for a tax credit of up to $1,000. Both tax breaks are available for new hires who have been unemployed for at least 60 days immediately prior to beginning their new job.

To be eligible, the employee must sign the W-11 Affidavit form.

There are two methods of handling the HIRE Act in Sage 100 Contractor. Method 1 is recommended, for the following reasons:

Continues to job cost the employer FICA to match how jobs were estimated.
Can declare the federal tax credit as income to the company, rather than reduced expense.

Note: Whichever method you choose, pick one and do not change it for 2010.

Method 1: Continue to compute employer FICA for eligible employees and the handling of this information at the reporting level

If you continued to compute employer FICA for each employee’s account eligible under the HIRE Act:

Check the “Eligible Under HIRE Act” on 5-2-1 Employees for eligible employees
Make sure you have no Payroll Audit Errors.
Use the Federal Tax Report to determine the amount of your federal tax deposit with the check box selected: “Subtract Employer FICA for HIRE Act.” This will subtract computed employer FICA for employees that have the “Eligible Under HIRE Act” checked in 5-2-1 Employees.

To adjust the general ledger for this employer credit:

Note: This method will leave your job costs unchanged.

Create a new Income account called HIRE Act Income or equivalent.
In menu 1-3 General Ledger, enter the following adjustment:
Debit the FICA Payable liability account for the amount of the federal tax credit.

Credit the new Income account for the amount of the federal tax credit.

For example, if you have employer Social Security for qualified employees totaling $850, you would enter the following GL adjustment:

	Debit	Credit
2300 FICA payable account	850.00
4015 HIRE Act Income		850.00

This adjustment will increase your income by $850 and reduce your FICA liability account by $850. This adjustment should be done with each payroll/or at the time of each federal deposit to ensure your liability account balance is accurate.

Method 2: If you either zeroed out the employer FICA rate or made the calculation no longer active for eligible employees under the HIRE Act

If you elect to skip computing employer FICA for each employee eligible under the HIRE Act:
Check the “Eligible Under HIRE Act” on 5-2-1 Employees for eligible employees
Set the employer FICA calculation on 5-2-1 Employees to inactive
Make sure you have no Payroll Audit Errors
Use the Federal Tax Report to determine the amount of your federal tax deposit. The “Subtract Employer FICA for HIRE Act” check box will not need to be checked since you have no calculated employer FICA amounts for these employees.
Before computing the first payroll check dated in 2011, be sure to activate the employer FICA calculation.