The IRS has released Form W-11 to help employers, including tax-exempt organizations, claim the special payroll tax exemption that applies to many newly-hired workers during 2010. The payroll tax exemption was created under the provisions of the Hiring Incentives to Restore Employment (”HIRE”) Act signed by President Obama on March 18, 2010. The HIRE Act created two new tax benefits to encourage employers to hire and retain new employees. Employers who hire previously unemployed workers this year (between February 3, 2010 and January 1, 2011) may qualify for a 6.2% payroll tax incentive, in effect exempting the employer from the employer’s share of social security tax on wages paid to these workers after March 18, 2010. However, employers would still need to withhold the employee’s 6.2% share of social security taxes, as well as income taxes. In addition, for each formerly unemployed worker retained at least one year, employers may claim a new hire retention credit of up to $1,000 per worker when filing annual income tax returns.
The HIRE Act 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 statement requirement.
A list of frequently asked employer questions on the HIRE Act is available here.