The Internal Revenue Service (IRS) April 7 released new resources that will help employers learn more about the payroll tax exemption and the new hire retention credit included in the Hiring Incentives to Restore Employment (HIRE) Act signed into law by President Obama March 18.
Under the HIRE Act, employers that hire unemployed workers after Feb. 3, 2010 and before Jan. 1, 2011 may be eligible for a payroll tax incentive, which essentially provides an exemption from the employer’s 6.2 percent share of Social Security taxes on wages paid to such employees from March 19, 2010 through December 31, 2010. In order to qualify, the newly hired worker may not have been employed for more than 40 hours during the 60-day period before beginning work.
In addition, for each qualified employee retained for at least 52 consecutive weeks, employers may claim the new hire retention credit of up to $1,000. The tax credit is claimed on the employer’s 2011 tax return.
In order for the employer to claim the payroll tax exemption or the new hire retention credit, the qualified employee is required to sign a statement, under penalties of perjury, that he or she has been unemployed for the specified amount of time. The
HIRE Act Affidavit or Form W-11 is posted on
www.irs.gov.
A business is required to use Form 941, Employer’s Quarterly Tax Return, to claim the payroll tax exemption. Although the final version will not be available until May, the IRS is offering a
draft of Form 941 for review.
For more information on the HIRE Act benefits, additional requirements or IRS resources, visit the IRS’ HIRE Act
frequently asked questions.