On March 18th, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act aimed at boosting job creation by providing employers with a payroll tax exemption for certain new hires.
To pay for the $17.6 billion measure, the bill increases disclosure requirements and withholding for offshore financial institutions per the Foreign Account Tax Compliance Act.
Payroll Tax Credit
Under the HIRE Act, employers will be eligible for payroll tax credits if they hire workers who have been unemployed for a minimum of 60 days and who are not replacement hires.
To qualify, employees must be hired after Feb. 3, 2010 and before Jan. 1, 2011. The employer can then claim a credit equal to their share of Social Security taxes on wages paid in 2010. To encourage retention, employers also will be eligible for an additional tax credit of $1,000 per employee for new hires retained for a minimum of 52 weeks. This credit can be taken on 2011 tax returns.
Foreign Account Tax Compliance Act
This legislation also includes new requirements for foreign banks, which will be asked to disclose their U.S. account holders and owners to the U.S. government – or face penalties. Foreign financial institutions that do not comply will be subject to a 30% withholding tax on income from U.S. financial assets.
Other provisions include requiring taxpayers to disclose their foreign accounts on their U.S. tax returns; increasing the statute of limitations to six years for failure to report certain offshore transactions and income; clarifying when a foreign trust is considered to have a U.S. beneficiary; and treating substitute dividend and dividend equivalent payments to foreign persons as dividends for purposes of U.S. withholding.
The HIRE Act also delays the effective date of the worldwide interest allocation election until 2020.
Need more information?
For more information on the HIRE Act and its effects on you and your business, please contact International Tax Services Chair Kay Biscopink at 864.250.3941 or firstname.lastname@example.org