Are full-service restaurants—even the smallest ones—able to get in on the tax cuts that were part of the Hiring Incentives to Restore Employment (HIRE) Act that became law earlier this spring? Absolutely. It’s the one time the foodservice industry’s high turnover rates might actually be helpful. Here’s how the deal works.
A pair of tax benefits in the HIRE bill can help restaurant owners save money right away. They apply to both seasonal hires and any new year-round employees you add. Any new employee hired after Feb. 3, 2010, and before Jan 1, 2011, qualifies—if, that is, your new worker had been unemployed during the 60 days prior to being hired by you. (Forty or fewer hours total of paid work during this 60-day period is OK). Furthermore, the new hire has to either fill a brand-new position you’ve created or replace a worker who left voluntarily or for cause from an existing position. Translation: you can’t just fire an existing worker without cause and replace him or her with a new, unemployed person and claim the tax credit. Also, your family members or other relatives don’t qualify.
What’s the standard of proof here? The IRS makes available a form on which a new hire can certify that he or she has been unemployed for the requisite 60 days and/or was underneath the 40-paid-hour threshold. Good news: the burden of proof is on the employee, not you.
What’s the payoff ? Comply with the HIRE Act’s standard and you don’t have to pay the employer’s 6.2 percent share of the Social Security tax. Keep the employee on for a full year and you can claim a general business tax credit of up to $1,000 on your 2011 income tax return.
In all, it’s an attractive hiring incentive for an industry where people come and go all the time. To find out more about how the HIRE Act works, go to www.irs.gov/businesses/small/article/0,,id=220745,00.html and follow the links there. That’s also where you can find form W-11, the HIRE Act employee affidavit you’ll need to have any new employee fill out.