OSPS E-News ~ Federal HIRE Legislation

Fri Apr 9 16:27:51 PDT 2010

Hello Everyone:

Some of you may have heard about the new federal HIRE Act that provides
for a FICA "tax holiday" on the wages of a new employee who had been
unemployed for the six months previous to being hired.  State and local
governments are not eligible for this program.  We are forwarding on a
news release from the IRS and have highlighted the key phrase near the
bottom of the information.  We hope this will answer any questions you
might have about this opportunity.  

If you are interested is subscribing to this IRS News Essentials
newsletter, there is a link at the bottom.  Have a great weekend!  

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IRS Newswire 

April 7, 2010 

News Essentials 

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Issue Number:    IR-2010-043 

Inside This Issue 

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Special Payroll Tax Exemption Form Now Available 

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 <http://www.irs.gov/pub/irs-pdf/fw11.pdf> , Hiring
Incentives to Restore Employment (HIRE) Act Employee Affidavit, is now
posted on IRS.gov, along with answers to frequently-asked questions
<http://www.irs.gov/businesses/small/article/0,,id=220745,00.html>
about the payroll tax exemption and the related new hire retention
credit. 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 form
<http://www.irs.gov/pub/irs-dft/f941--dft.pdf>  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. IRS.gov has more
details. 

Related Item: IR-2010-33
<http://www.irs.gov/newsroom/article/0,,id=220326,00.html> , Two New Tax
Benefits Aid Employers Who Hire and Retain Unemployed Workers 

Back to Top 

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