From APRA e-Connection
The Hiring Incentives to Restore Employment (HIRE) Act allows an
employer to claim the tax benefits for a newly hired employee who has
not worked more than 40 hours during the 60-day period preceding the
date of employment.
Employers who hire unemployed workers this year (hired after Feb. 3,
2010 and before Jan. 1, 2011) may qualify for a 6.2% payroll tax
incentive, in effect exempting them from their share of Social Security
taxes on wages paid to these workers. This payroll tax exemption will
apply to wages paid to qualified employees from Mar. 19, 2010 through
Dec. 31, 2010. The reduced tax withholding will have no effect on the
employee’s future Social Security benefits, and employers will still
need to withhold the employee’s 6.2% share of Social Security taxes, as
well as income taxes. The employer and employee’s share of Medicare
taxes will also still apply to these wages.
In addition, for each worker retained for at least a year, businesses
may claim an additional general business tax credit, up to $1,000 per
worker, when they file their 2011 income tax return. These tax benefits
can be especially beneficial to employers who are expanding their
workforce. New hires filling existing positions also qualify, but only
if the workers they are replacing left voluntarily or for cause. In
other words, an employer cannot arbitrarily discharge workers and then
replace them in order to take advantage of the tax benefits.
The new law requires that the employer get a statement from each
eligible new hire certifying that he or she was unemployed during the
60 days before beginning work or, alternatively, worked fewer than 40
hours for someone else during the 60-day period. The IRS has issued
draft Form W-11, HIRE Act Employee Affidavit, for employers to obtain a
statement from employees, confirming their prior unemployed status.
Employees must sign the form under penalties of perjury. Employers may
use a similar statement that provides the same information.
Employers will claim tax exemption on Form 941, Employer’s Quarterly
Federal Tax Return, beginning with the second quarter of 2010. For
wages paid during the applicable part of the first quarter (Mar. 19-31,
2010), you can claim the exemption on Form 941 for the second quarter.
If you have questions about the HIRE Act or need assistance implementing this program, contact [email protected], or phone at 423-764-4127.
