As Washington updates employment laws and tax guidelines in response to the recession, Total HR focuses on keeping our clients and potential clients aware of these changes. Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These incentives are part of the Hiring Incentives to Restore Employment (HIRE) Act. A definite benefit of working with Total HR is that we take care of all the paperwork required to ensure that client employers receive the proper tax credit, including determining eligibility, securing completed W-11 forms (the new HIRE Act qualification form from the IRS) from qualifying new hires and submitting updated 941 forms to the IRS to ensure the tax credit is issued.
The HIRE Act Helps Your Company Save Money
Employers who hire unemployed workers this year (after 2/3/2010 and before 1/1/2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.
In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns. As IRS Commissioner Doug Shulman explains: “These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead.” Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly hired employees.
The Incentive To Hire New Employees
The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. It is important to note that family members and other relatives do not qualify. The new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked no more than 40 hours for anyone during the 60-day period. The W-11 form is available on the IRS Site (HERE IS A DIRECT LINK), and employees can use this form to make the required statement. If you work with Total HR, we will do all the necessary paperwork for you and your employees.
Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. If an employee qualifies, the payroll tax exemption applies to all wages paid to a qualified employee unless the employer elects out of the payroll tax exemption with respect to the employee.
If an employee laid off in 2009 has been receiving COBRA premium assistance, for which the employer has been taking the COBRA premium assistance credit, and the employer rehires the employee, the employer can take the payroll tax exemption under the HIRE Act for wages paid to the employee. If an employer applies the exemption to wages paid to a nonqualified employee, the employer becomes liable for the amount of employer social security tax on wages previously reported as exempt. The employer must file Form 941-X with the IRS for each prior quarter for which the exemption was erroneously applied. As a client of Total HR, we will make sure that these forms are properly filed for your company and you receive the tax credit issued.
While promoted as a measure to increase employment, the HIRE Act’s intricacies and mechanics will principally benefit employers that now have open positions available, and the ability to fill them quickly. Additionally, given that under certain circumstances the Work Opportunity Tax Credit (WOTC) may provide more generous benefits to employers than the HIRE Act’s tax holiday provisions, an employer will have the option—on an individual employee basis—to opt out of the HIRE Act where WOTC provides a better option.
If you are a client or potential client of Total HR Management and you need the details of how the HIRE act applies to your company, please contact us right away. Not only will we provide with the information needed, but Total HR also will take care of all the paperwork required to ensure that you receive the proper tax credit, including determining eligibility, securing completed W-11 forms from qualifying new hires and submitting updated 941 forms to the IRS to ensure the tax credit is issued. We are here to increase your productivity and profitability by providing the services, resources and information your company needs in this challenging economy.
