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HIRE Act – IRS Releases New Forms

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April 14, 2010

The Hiring Incentives to Restore Employment (HIRE) Act, known more commonly as the Jobs Bill, was signed by President Obama on March 18, 2010, with hopes that the bill will prompt job growth by encouraging private businesses to hire new workers.  With aspirations of generating 250,000 jobs by the end of year, the bill creates approximately $8 billion in tax breaks for employers and other incentives, including the following:

  • Exempts businesses from paying the 6.2% social security payroll tax through December 2010 for every worker hired for new positions in 2010 who has been unemployed for at least 60 days. However, these benefits cannot be used in situations where a HIRE Act employee replaces a current employee, unless the current employee quits or is terminated for cause. Employees are required to sign an affidavit (under penalties of perjury) that he or she was employed for a total of 40 hours or less during the 60-day period ending on the date the employment begins (see description of new Form W-11 below).
  • Provides an additional $1,000 credit for employers if new workers stay on the job for 12 months, were hired and began working during the tax year, and received at least 80% of the wages paid to them in the first 26 weeks during the second 26 weeks of their employment.
  • Extends tax breaks for small businesses buying new equipment.

During a payroll industry teleconference held on April 1, 2010, the IRS explained upcoming changes to certain tax forms to address the tax credits and incentives provided by the HIRE Act.

Form 941 “Employer's Quarterly Federal Tax Return”

The IRS expects to release a new version of this form this month to be used for the filing corresponding to the second quarter of this year and due on August 2, 2010. Form 941 will continue to be revised and updated in the upcoming months. For example, in accordance with the IRS’ new compliance program regarding unreported tip income, the  2011 version of this form will likely include a line for the tip adjustment (e.g., employer must pay FICA tax on unreported tip income). As usual, employers are cautioned to verify the most updated version of Form 941 prior to each filing.

New Form W
-11 “Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit”

The IRS recently created this new form for employers to obtain the employee’s declaration regarding their lack of employment prior to commencement of the new job with the employer claiming the credit. Worth noting is that this new form need not be notarized. Also, it is likely that employees will have the opportunity to sign this form electronically in the future. The new Form W-11 may be found here.

Form W-2 “Wage and Tax Treatment”  

The IRS anticipates including a new code on box 12 (Code CC) of the 2010 version of this form to specify that a new hire had wages that qualified for the payroll tax exemption.

Form W-3 “Transmittal of Wage and Tax Statements”

The IRS is planning to include a new line in this form to indicate the total aggregate exempt wages.

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