By now, just about everyone knows about the HIRE Act, or what’s known as “the jobs bill,” and the benefits of taking on new employees. There’s a bit more to it than meets the eye, however, and understanding the fine details — and avoiding mistakes — can make a big difference for employers.

First, the basics of the Act:

• Qualifying hires must occur after February 3, 2010, and before January 1, 2011.
• For qualified hires, employers will receive a 6.2% payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after the date of enactment.
• For each qualified hire retained for at least a year, employers can claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

Those are the benefits. Here’s what you and your HR department have to watch out for:

Anyone you hire must have been unemployed for at least 60 days. Those individuals must be able to certify “by signed affidavit” and under penalty of perjury, that they “have not been employed more than 40 hours in the 60-day period ending on the date such individual gains such employment.”

• You cannot take the credit if the individual is hired to replace a person who is terminated, “unless such other person is separated from employment voluntarily or for cause.”
• There’s a wage rule you have to meet to qualify for the $1,000 tax credit for keeping the person on for at least 52 weeks: Wages paid in the last 26 weeks must equal at least 80% of wages paid in the first 26 weeks. This is the credit that can be taken on an employer’s income tax return filed in 2011.
• This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2% share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

Something to discuss with your accountant: Another part of the bill encourages investment by extending the Section 179 depreciation deduction at its 2008/2009 higher amount of $250,000 with a phase-out when expenditures hit $800,000. The higher level deduction expired at the end of 2009, pending further action by Congress.