What is the IRS Retention Credit? This credit is part of the HIRE Act. If a qualified employer who has hired a qualified employee retains that employee for 52 consecutive weeks, they may be eligible for a $1,000.00 business tax credit. See my Article on the Hire Retention Credit for a definition of qualified employers and qualified employees.
Qualified employers can receive a credit of the lesser of $1,000.00 or 6.2% of total wages paid to a qualified employee on their tax return at the end of their tax year. For instance, if you are self-employed and file a Schedule C with your Form 1040, then you would claim the credit on your Form 1040.
To be eligible for the credit, the qualified employer must retain their qualified employee for 52 consecutive weeks or more, and for the last 26 weeks of the 52 consecutive weeks, the wages for the qualified employee must equal at least 80% of the wages for that employee in the first 26 weeks of employment. This means that in order to get the credit, you cannot hire someone full time for the first 26 weeks and then drop them down to half time for the remaining 26 weeks. For more information go to the IRS website article on the Hire Credit.