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Monday, April 12, 2010

IRS Releases Forms for Claiming HIRE Tax Exemption















Alabama@Work
By Tommy Eden, Attorney

The Internal Revenue Service has released a new form that will help employers claim the special payroll tax exemption that applies to many newly-hired workers during 2010, created by the Hiring Incentives to Restore Employment (HIRE) Act. The Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, is now posted on IRS.gov, along with answers to frequently-asked questions: http://www.irs.gov/businesses/small/article/0,,id=220745,00.html
about the payroll tax exemption and the related new hire retention credit. Form W-11 can be retrieved at http://www.irs.gov/pub/irs-pdf/fw11.pdf

The new law requires that employers get a statement from each eligible new hire, certifying under penalties of perjury, that he or she was unemployed during the 60 days before beginning work or, alternatively, worked less than a total of 40 hours for anyone during the 60-day period. Employers can use Form W-11 to meet this requirement. Though employers need this certification to claim both the payroll tax exemption and the new hire retention credit, they do not file these statements with the IRS. Instead, they must retain them along with other payroll and income tax records.

Most eligible employers use Form 941, Employer’s Quarterly Federal Tax Return, to claim the payroll tax exemption for eligible new hires. This form, revised for use beginning with the second calendar quarter of 2010, is currently posted as a draft form on IRS.gov and will be released next month as a final along with the form’s instructions. See revised draft Form 941: http://www.irs.gov/businesses/small/article/0,,id=220745,00.html

The HIRE Act, signed into law March 18 created two new tax benefits designed to encourage employers to hire and retain new workers. Employers who hire unemployed workers after February 3, 2010, and before January 1, 2011, may qualify for a 6.2% payroll tax incentive, in effect exempting them from the employer’s share of social security tax on wages paid to these workers after March 18. In addition, for each unemployed worker retained for at least a year, businesses may claim a new hire retention credit of up to $1,000 per worker when they file their 2011 income tax returns.

Common Sense Counsel this a great way to stimulate the Alabama economy and get a tax credit. But you must have the Form W-11 signed by the new employee. Also important that you read over the Q&A and use the revised Form 941 once released.


Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com