Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes. In order to qualify under the HIRE Act, the wages must be paid by a qualified employer “with respect to employment” in the period beginning March 19, 2010 and ending December 31, 2010. The Internal Revenue Service (IRS) has provided employers further information on the HIRE Act.
According to the IRS, the HIRE Act payroll tax exemption applies to an employee who has been on furlough, standby status or temporary layoff “only if the furlough, standby status, or temporary layoff constitutes a termination of employment and, upon reestablishment of the employment relationship, the requirements to be a qualified employee are satisfied. Whether the employment relationship has terminated is based on facts and circumstances.” An earlier post reviewed when employment begins for purposes of the HIRE Act.
Employers should review employees who have been on furlough, standby status or temporary layoff and determine if the rehired employee is eligible under the HIRE Act.