Special Payroll Tax Exemption Form Now Available

[kcjenkins]

IR-2010-43, April 7, 2010

WASHINGTON - The Internal Revenue Service today 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 signed by President Obama on March 18.

New Form W-11 Link to Form, Hiring Incentives

to Restore Employment (HIRE) Act Employee Affidavit, is now posted on

IRS.gov, along with answers to frequently-asked

questions about the payroll tax exemption and the related new hire retention

credit. Link to Pub 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 fewer than a total of 40 hours for anyone during the 60-day period.

Employers can use Form W-11 to meet this requirement.

Most eligible employers then 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 <http://www.irs.gov/pub/irs-dft/f941--dft.pdf>

form on IRS.gov and will be released next month as a final along with the

form's instructions.

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.

The HIRE Act created two new tax benefits designed to encourage employers to

hire and retain new workers. As a result, employers who hire unemployed

workers this year (after Feb. 3, 2010, and before Jan. 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. This reduction will have no effect on the employee's future Social

Security benefits, and employers would still need to withhold the employee's

6.2-percent share of Social Security taxes, as well as income taxes. 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.

These two tax benefits are especially helpful to employers who are adding

positions to their payrolls. New hires filling existing positions also

qualify but only if the workers they are replacing left voluntarily or for

cause. Family members and other relatives do not qualify for either of these

tax incentives.

Businesses, agricultural employers, tax-exempt organizations, tribal

governments and public colleges and universities all qualify to claim the

payroll tax exemption for eligible newly-hired employees. Household

employers and federal, state and local government employers, other than

public colleges and universities, are not eligible. Visit IRS.gov for

details.

[Ray in Ohio]

I would rather be a sheep herder! :scratch_head: