The Hiring Incentives to Restore Employment (HIRE) Act, also known as the “jobs bill”, that was signed into law on March 18, 2010, is a Federal Tax program that provides employers with incentives to hire and retain employees. There are two main components of this program that can benefit employers. The HIRE Act will exempt an employer from paying the employer portion of Social Security taxes, 6.2%, for the remainder of 2010 on wages of qualified new hires. The second component is the business credit of $1,000.00 for the retention of new hires, whereas a qualified employee is employed for 52 consecutive weeks.
What does this mean to you?
To take advantage of these tax benefits, employers should identify all current employees who may meet the requirements of a qualified employee, as well as all employees that will be hired through the end of 2010. A qualified employee is one that is hired after February 3, 2010, and before January 1, 2011, but can not be hired to replace another employee unless the previous employee was separated from employment voluntarily, or for cause. A qualified employee can not be related to the employer, or business owner. Also, a qualified employee must complete an affidavit certifying that they have not been employed for more than 40 hours during the 60 days prior to the date that employment begins with the new employer. For those employees that meet the qualifications for the HIRE Act, the employer will be exempt from paying the 6.2% employer portion of the Social Security tax on wages paid between March 19, 2010, and December 31, 2010, up to the Social Security wage base of $106,800.00 for 2010. This means that the employer can save up to $6,621.60 in Social Security tax for each qualified employee in 2010. There is no limit to the total amount of tax benefits or hires during this period either. The IRS released yesterday a new form that will help employers claim the special payroll tax exemption for qualified employees. New Form W-11, HIRE Act Employee Affidavit, is now posted on the IRS website. The new law requires that employers get an affidavit from each qualified employee, certifying under penalties of perjury, that the individual has not been employed for more than 40 hours during the 60-day period ending on the first day of employment. Form W-11 was created and approved by the IRS to meet this requirement.
View IRS Documentation Here
A business tax credit can also be claimed by the employer for each qualified employee that is hired after February 3, 2010, and is employed by the employer for at least 52 consecutive weeks. This business tax credit will be the lesser of $1,000.00 or 6.2% of the wages paid to the qualified employee during the 52 consecutive
week retention period. For the employer to claim this additional Retained Worker Tax Credit (RWTC), the wages paid during the second 26 weeks of employment must equal at least 80% of the wages paid to that employee during the first 26 weeks of employment.
What is ProPayroll doing to help you?
Eligible employers can begin to claim the payroll tax exemption for qualified employees beginning immediately. The IRS is in the process of creating a new Form 941 to report the tax credits beginning with filing for the 2nd Quarter of 2010. The wages and credits for qualified employees from the 1st Quarter of 2010 will also be reported to the IRS on the filing for the 2nd Quarter of 2010. Beginning immediately, employers can
reduce their Federal Tax Deposits by the credit amount of the tax exemption for all qualified employees, or they can wait to claim the credit on their Form 941 when filed.