2010 New Hire Credit FAQ’s

FAQs About the Credit

Q1: What is the new hire retention credit and what does it apply to?
A1: This is a general business credit to encourage retention of new hires (retained workers). The employer may claim
the credit for each retained worker. A retained worker is a qualified employee (as defined for purposes of the payroll
tax exemption) who remains an employee for at least 52 consecutive weeks, and whose wages (as defined for income
tax withholding purposes) for the last 26 weeks equal at least 80% of the wages for the first 26 weeks. The amount of
the credit is the lesser of $1,000 or 6.2% of wages (as defined for income tax withholding purposes) paid by the
employer to the retained worker during the 52 consecutive week period.
Q2: If an employer chooses to claim the WOTC for a qualified employee, can the employer still
claim the new hire retention credit for that qualified employee?
A2: Yes, an employer may claim the retention credit for a qualified employee even if the employer has also claimed
the WOTC for the same employee.
The new hire retention credit can be claimed for any qualified employee, as defined for purposes of the payroll tax
exemption, once the employee is employed for 52 consecutive weeks, so long as the employee’s wages (as defined
for income tax withholding purposes) for the last 26 weeks of employment equal at least 80% of the employee’s wages
for the first 26 weeks of employment.
Q3: For what years can an employer claim the new hire retention credit with respect to a retained
worker?
A3: The credit may be claimed for a retained worker for the first taxable year ending after March 18, 2010 (the date of
enactment of the HIRE Act), for which the retained worker satisfies the 52 consecutive week requirement. However,
since retained workers must be qualified employees, the credit applies only for workers hired after February 3, 2010,
and before January 1, 2011.
Q4: Can a business carry back any portion of the new hire retention credit to use against a tax
liability for years beginning before March 18, 2010, the date of enactment of the HIRE Act?
A4: No, the portion of the general business credit attributable to the new hire retention credit cannot be carried back to
a taxable year that begins before March 18, 2010.
Q5: Can the new hire retention credit offset the business Alternative Minimum Tax?
A5: No, the new hire retention credit cannot be used to offset the business Alternative Minimum Tax.
Q6: Will the business deduction for compensation be reduced and or affected by the new hire
retention credit?
A6: No.

References/Related Topics
• Business Credit for Retention of Certain Newly Hired Individuals in 2010
• HIRE Act: Questions and Answers for Employers
FAQs About Retained Workers
Q1: Is the requirement that a retained worker remain an employee for at least 52 consecutive weeks
relevant only for purposes of the new hire retention credit?
A1: Yes, the 52-week requirement is used to determine eligibility for the new hire retention credit. It is not a
requirement for the payroll tax exemption.
Q2: When does the period start for determining whether a qualified employee has been employed
for at least 52 consecutive weeks?
A2: The period for determining whether a qualified employee has been employed for at least 52 consecutive weeks
starts on the date the employee begins employment with the employer. Refer to QE17 on FAQs About Qualified
Employees.
Q3: Does an employee have to work during the entire 52 consecutive week period in order to qualify
as a retained worker? For example, does unpaid vacation time or sick leave count for purposes of the 52
weeks?
A3: In order to be a retained worker, the qualified employee must be employed by the employer for a period of not
less than 52 consecutive weeks. Whether a qualified employee is employed for 52 consecutive weeks depends on the
facts and circumstances.
As long as the employment relationship is not terminated during the 52 consecutive weeks and the wages paid to the
qualified employee for the last 26 weeks of the 52-week period equal at least 80 percent of the wages paid to the
employee for the first 26 weeks, the employee will be a retained worker even if he or she is not performing services
the entire time.
References/Related Topics
• Business Credit for Retention of Certain Newly Hired Individuals in 2010
• HIRE Act: Questions and Answers for Employers

FAQs About Calculating and Claiming the Credit Q1: How will the new hire retention credit be claimed?
A1: The new hire retention credit will be claimed on the employer’s income tax return.
Q2: Do wages for purposes of the new hire retention credit include bonuses or taxable fringe
benefits?
A2: All remuneration that is considered wages for federal income tax withholding purposes is counted for purposes of
the new hire retention credit.
Q3: Can a fiscal year taxpayer claim the new hire retention credit on its 2010 income tax return?
A3: A fiscal year taxpayer may claim the new hire retention credit on its 2010 income tax return if the requirements for
the credit have been met by the end of its 2010 taxable year. For example, if a business with a taxable year beginning
April 1, 2010, hired a qualified employee on March 15, 2010, and the employee met the requirements for being a
retained worker by March 31, 2011, the business would be eligible to claim the credit on the return for the taxable year
beginning April 1, 2010, and ending March 31, 2011.
Q4: May an employer claim both the payroll tax exemption and the new hire retention credit with
respect to the same employee?
A4: Yes, as long as the requirements for each are met.
References/Related Topics
• Business Credit for Retention of Certain Newly Hired Individuals in 2010
• HIRE Act: Questions and Answers for Employers