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
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.
HERE to download Form 941.
HERE to download Form W-11.
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