Hawaii employers could reap $7M in HIRE Act tax credits

Question: Is it true that Hawaii employers may be eligible to claim about $7 million in tax credits under the HIRE Act, a federal law enacted in 2009 to increase employment of those out of work for 60 days or more?

Answer: Yes, that’s the estimate. That’s the potential pool. The thing is, though, it’s been a year since people were last thinking about the HIRE Act, so it’s not top of mind for anyone anymore. The process to calculate what this is is fairly complicated, because you have to calculate it separately by employee. It’s not as simple as, "I’ve employed them for 52 weeks. Great, I get $1,000." An employer has to discern during what 52-week period did the individual work, then look at the wages from the first half and compare it to the wages paid during the second half of the 52-week period, and the wages from the second half need to be at least 80 percent of the wages from the first half. It’s to guarantee that the individual worker wasn’t just brought on at full-time status and dropped to part-time status, to make sure employees were being maintained at a similar level of employment.

Q: So is it right that the HIRE Act applies only to employers who, between Feb. 3 and Dec. 31 of 2010, hired people who had been previously unemployed for 60 days, and that they would have had to claim the HIRE Act tax credit for the 2010 taxable year?

A: If employers were on the bandwagon during 2010, then they’ll be able to take advantage of the retention credit. … This program has really been such a great benefit to companies throughout Hawaii, and I hope this article helps remind companies of the HIRE Act’s New Hire Retention Credit as they file their 2011 business income tax filings.

Q: How many workers in Hawaii were hired during the HIRE Act dates?

A: The U.S. Treasury had posted a report Dec. 8 of 2010 saying there were just over 38,235 employees eligible for the HIRE Act in Hawaii. This was the first part of the HIRE Act, and ProService had 3,217 of those employees at client companies — across 594 client companies of ours. They received tax credits that totaled $1.1 million … so that gives you an idea of how big the program is.

Of the 3,217 employees, 631 of those employees were eligible for the second credit, the retention credit, and so that was about 20 percent of our original number. Our average credit per employee (for the second credit) was $910 in tax savings. The Act contained a per-employee max of $1,000, and our average was $910.

Q: Is there a local or national governmental help desk that can help employers sort through all this?

A: No, there’s not, but the IRS has (online) guidance on how to do the calculation. Companies typically would go to a CPA or whomever is going to be filing (tax returns) for them, but it’s different because this is a one-time tax credit and a one-time tax calculation they may not be familiar with. It is really a lot of effort, but the savings potential is really great.

Q: So it’s worth burning some midnight oil?

A: Among ProService client companies, 18 of them will be receiving $5,000 or more in retention credits, in addition to the credits they received in 2010. One client, Performance Landscaping, received $4,993.65 through the HIRE Act (in 2010), and through the retention credit, they had higher than 20 percent retention — they’ll be receiving $8,000 in (HIRE Act tax) credits.

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On the Net:

» is.gd/IRS_HIREActHelp