"Jobs Bill" – New Form W-11
In News Release IR-2010-43, the IRS announced the release of new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, to confirm that an employee is a qualified employee for the special payroll tax exemption of the employer's share of certain social security taxes on wages under the HIRE Act. The Act (a/k/a the "jobs bill"), which was signed into law on March 18, 2010, allows an exemption for the employer share of social security taxes on wages for services performed by qualified employees after March 18, 2010, and before January 1, 2011.
A qualified employee:
The exemption applies only to the employer portion of social security FICA taxes (6.2%), but the employee share of FICA taxes must still be withheld and remitted. The exemption does not apply to the employer portion of Medicare tax (1.45%). The exemption will be claimed on the employer's Form 941, Quarterly Federal Tax Return. However, a credit for taxes already paid for qualified employees from February 3, 2010 through March 31, 2010 will be claimed on the return for the second quarter of 2010. The IRS is currently revising the Form 941 for this purpose.
Note: Additionally, the 2010 Form W-2 has been revised to include new box 12 code "CC" to denote HIRE-exempt wages and tips.
The HIRE Act also provides a tax credit of up to $1,000 per worker retained at least one year. The credit will be claimed as part of the general business credit and available on the return filed for 2011. It is expected that the IRS will design a new form and/or revise Form 3800, General Business Credit, for this purpose.
The IRS has posted frequently asked questions about the exemption and the upcoming credit on its site.
A qualified employee:
- Begins employment after February 3, 2010, and before January 1, 2011.
- Signs Form W-11 certifying that they have not been employed more than 40 hours during the 60-day period ending on the date they began employment.
- Did not replace an existing employee (unless the previous employee separated from service voluntarily or for cause).
- Is not related to the employer (generally, children, siblings, and descendents of these, parents and their ancestors, and in-laws).
The exemption applies only to the employer portion of social security FICA taxes (6.2%), but the employee share of FICA taxes must still be withheld and remitted. The exemption does not apply to the employer portion of Medicare tax (1.45%). The exemption will be claimed on the employer's Form 941, Quarterly Federal Tax Return. However, a credit for taxes already paid for qualified employees from February 3, 2010 through March 31, 2010 will be claimed on the return for the second quarter of 2010. The IRS is currently revising the Form 941 for this purpose.
Note: Additionally, the 2010 Form W-2 has been revised to include new box 12 code "CC" to denote HIRE-exempt wages and tips.
The HIRE Act also provides a tax credit of up to $1,000 per worker retained at least one year. The credit will be claimed as part of the general business credit and available on the return filed for 2011. It is expected that the IRS will design a new form and/or revise Form 3800, General Business Credit, for this purpose.
The IRS has posted frequently asked questions about the exemption and the upcoming credit on its site.