IRS just released a brand-new form, and it’s one many employers can’t live without.
The new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, must be filled out and signed by every new hire during 2010 – otherwise, the employer can’t qualify for the payroll tax exemption and related new-hire retention credit.
Under the new law, employers must get a statement from each qualifying new hire that certifies the person:
- has been fully unemployed during the previous 60 days, or
- worked fewer than a total of 40 hours for another employer during that time.
Employers can either use the Form W-11 or their own affidavit (as long as it contains all the necessary info) to meet this requirement. They should keep the affidavits along with other payroll and income tax records – not send them to IRS.
To claim the payroll tax exemption, employers will use Form 941, Employer’s Quarterly Federal Tax Return, which should be released in its final version shortly. In the meantime, you can see the draft form here. IRS expects to release one version for second-quarter reporting, and another new version for the third quarter and beyond.
The HIRE Act created two new benefits to encourage employers to hire and retain new workers:
- Payroll tax holiday. Companies that hire anyone unemployed for more than 60 days this year may qualify for the 6.2% payroll tax incentive, which exempts them from the employer’s share of Social Security tax on wages paid to these workers after 3/18/10. Eligible workers must be hired after 2/3/10 and before 1/1/11. Employers must still withhold the new hires’ share of the Social Security tax.
- Retention ‘bonus.’ Employers that keep these new hires on the payroll for 52 consecutive weeks may also claim a retention credit of up to $1,000 per worker on their 2011 income tax returns.
Businesses, agricultural employers, tax-exempt organizations, tribal governments and public colleges and universities all qualify to claim the payroll tax. Household employers and federal, state and local government employers, other than public colleges and universities, are not eligible.