• An employer must be in a trade or business, providing some form of good or service to qualify.
• Tax-exempt and non-profit organizations qualify for the payroll exemption.
• Employers in the U.S. and District of Columbia, as well as all U.S. territories and possessions, that are subject to Social Security tax can qualify. 
• Federal, state, or local government employers do not qualify for the payroll tax exemption; however, public colleges and universities can qualify.
• Household employers do not qualify.

How do individuals qualify?

• Begins employment with a qualified employer after February 3, 2010, but before January 1, 2011.
• Has not been employed for more than a total of 40 hours during the previous 60 days, including weekends, and the previous 60 day period must be continuous.
• The employee can be hired into a new position, or the employee may replace another employee, but only if the other employee is separated from employment voluntarily or for cause.  For cause could mean situations such as downsizing or performance issues.  (Employers should consult with an attorney or employment law expert about their specific employment policies regarding "for cause" reasons.)
• Is not a family member of the business owner. An employee is considered related to the employer if he or she is: 
  • A child or descendent of their child,
  • A sibling or stepsibling,
  • A parent or an ancestor of their parent, their stepparent, their niece or nephew, their aunt or uncle, or their in-law.
  • An employee also is related if he or she is related to anyone who owns more than 50 percent of their outstanding stock or capital and profits interest or is their dependent or a dependent of anyone who owns more than 50 percent of their outstanding stock or capital and profits interest.
  • A spouse may qualify, but it depends on the percentage of ownership that the spouse who is hiring the other has in the business. 
• Is not a household or government employee
• Is required to attest by signed affidavit, or similar statement under penalties of perjury, that he or she has not been employed for more than a total of 40 hours during the 60-day period ending on the date the employee begins employment with the employer.  The IRS created a new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit and is used to confirm that an employee is qualified under the HIRE Act.

Note:  This credit will have no impact on the qualified individual's Social Security benefits.  The Federal Treasury will transfer funds to make the Social Security account whole so there is no detriment to the employee hired under the Act.