The following tax tip can save you money on employees hired after February 3, 2010:
On March 18, 2010 the Hiring Incentives to Restore Employment (HIRE) act was enacted. There are two distinct and very valuable benefits for employers that hire new employees after March 18, 2010:
1) a payroll tax exemption for hiring unemployed workers,
and
2) a tax credit (dollar for dollar against tax liability) for the retention of newly hired individuals in 2010.
This post will address the first tax benefit: the payroll tax exemption for the hiring of unemployed workers.
If your business hires or hired a new employee after February 3, 2010 through December 31, 2010, and that new employee was unemployed for 60 days prior to their hire date, you, the employer, will be exempted from paying the matching Social Security tax (6.2% of wages up to $106,800) for all wages paid on and after March 19, 2010.
This exemption does not apply to the employee’s share of the Social Security tax. In addition, this will have no affect on the employee’s withholding or employer’s matching portion of the Medicare tax.
Who are qualified employees?
Qualified employees are individuals who begin employment with a qualified employer after February 3, 2010, and before January 1, 2011, who have been unemployed or employed for 40 hours or less during the 60-day period ending on the date such employment begins, who are not employed by the qualified employer to replace another employee of that employer, unless the other employee separated from employment voluntarily or was terminated for cause, and who are not family members of or related in certain other ways to the employer.
What is required to claim this exemption?
Qualified employees must certify by a signed affidavit, under penalties of perjury, that they have not been employed for more than 40 hours during the 60-day period ending on the date they started employment. Form W-11 must be filled out and signed by the employee. Go to http://www.irs.gov/pub/irs-pdf/fw11.pdf to download the form.
Source: IRS.gov