New Tax Benefits Available to Aid Employers Hiring and Retaining Unemployed Workers
June 8, 2010

With an increasing number of construction workers currently looking for work, now may be a good time for contract glazing firms and glass shops, looking to grow, to take on some new hires. Earlier this year President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act into law. The new legislation makes available tax benefits to employers hiring workers who were previously unemployed or only working part time. Employers who hire unemployed workers between February 3, 2010 and January 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.

In addition, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new hire retention credit of up to $1,000 per worker on their income tax return. CLICK HERE for more information on both the tax credit and the payroll tax exemption.

The Internal Revenue Service (IRS) has now issued the newly revised payroll tax form that most eligible employers can use to claim this special payroll tax exemption. To claim the payroll tax exemption, Form 941, Employer's Quarterly Federal Tax Return, must be filed by employers claiming the payroll tax exemption for wages paid to qualified employees. The HIRE Act does not allow employers to claim the exemption for wages paid in the first quarter but provides for a credit in the second quarter. (CLICK HERE for instructions on using Form 941.)

In addition, the HIRE Act requires employers to get a signed statement from each eligible new hire, certifying that he or she was not employed for more than 40 hours during the 60 days before beginning employment with that employer. The new Form W-11 can be used to meet this requirement. Though employers need this certification to claim both the payroll tax exemption and the new hire retention credit, they do not file these statements with the IRS. Instead, they must retain them along with other payroll and income tax records.

CLICK HERE to download Form 941.

CLICK HERE to download Form W-11.

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