IRS Creates A Form Affidavit For Payroll Tax Exemption Under The Hire Act

Payroll Tax

HIRE Act Payroll Tax Exemption

In conjunction with the recently-passed Hiring Incentives to Restore Employment (“HIRE”) Act, the Internal Revenue Service (“IRS”) just issued a form Employee Affidavit that employers can use to claim a payroll tax exemption.  You can view and print out the form affidavit at: http://www.irs.gov/pub/irs-pdf/fw11.pdf

As we detailed in our earlier posting on the HIRE Act, the new law contains two significant tax breaks that are available to most private employers.  First, it exempts an employer from its obligation to match the Social Security portion of FICA tax in 2010 for any unrelated employee, hired after February 3, 2010 and before January 1, 2011, who (1) swears under oath that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employee begins his or her employment with the employer, and (2) was not hired to replace another employee, except an employee who voluntarily resigned or was terminated for cause.  In order to establish that an employee’s hiring meets the first of those two elements, employers can have the qualified employee sign the form affidavit, which is also known as a Form W-11.  Second, the HIRE Act also offers a tax credit to companies that keep a newly-hired qualified employee for at least 52 consecutive weeks, so long as the employee’s wages during the last 26 weeks of that period are at least 80 percent of his or her wages during the first 26 weeks of the period.  The tax credit is equal to the lesser of $1,000 or 6.2 percent of the employee’s wages during the 52-week period.

Should you have any questions about the HIRE Act or ascertaining its applicability to newly-hired employees, please contact your Arnstein & Lehr LLP attorney.

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