The Internal Revenue Service (IRS) has posted on its website the newly-revised payroll tax form that most eligible employers can use to claim the special payroll tax exemption that applies to many new workers hired during 2010. The payroll tax exemption and the related new hire retention credit were created by the Hiring Incentives to Restore Employment (HIRE) Act signed into law on March 18.
Employers who hire unemployed workers after February 3, 2010 and before January 1, 2011 may qualify for a 6.2 percent 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. The employee’s 6.2 percent share of Social Security tax and the employer and employee’s shares of Medicare taxes still apply to all wages. Form 941, Employer’s Quarterly Federal Tax Return, revised for use beginning with the second calendar quarter of 2010, will be filed by most employers claiming the payroll tax exemption for wages paid to qualified workers. The instructions for the new Form 941 are also available.
The HIRE Act requires that employers get a signed statement from each eligible new hire, certifying that he or she was not employed for more than 40 hours during the 60 days before beginning employment with that employer. Employers can use new Form W-11 released last month to meet this requirement.
In addition, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new hire retention credit of $1,000 per worker on their income tax return.
Further details on both the tax credit and the payroll tax exemption can be found in a list of answers to frequently asked questions about the new law posted Here.
View the tax exemption announcement that appeared on the Associated General Contractors website Here.