The Hiring Incentives to Restore Employement (HIRE) Act was enacted on March 18, 2010.  What does mean to you?

Employers who hire unemployed workers after 2/3/10 and before 1/1/11 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 3/18/10.  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 the Social Security taxes, as well as income taxes.  Both the employer and employee’s shares of Medicare taxes would also appy to these wages.

Following are changes to forms affected by the HIRE Act:

• Form 941, the Employers Quarterly Federal Tax Return, will be revised for second quarter filings.  Any first quarter credit amounts would be treated as a payment for the second quarter – similar to the COBRA subsidy tax credit – and would need to be claimed on the second quarter Form 941 filing.  For the following quarters, employers will report total amounts on the first page of the 941, and reduce the liability on Schedule B, Form 941 by the amount of the tax reduction.
• 2010 Form W-2 will have Code “CC” added to Box 12 for reporting HIRE Act exempt wages and tips for qualified employees.
• Form W-3 will have a line added
• Form W-11 to be completed by newly-hired employees to confirm they are qualified under the HIRE Act. 

Employers cannot claim HIRE Act benefits, including a payroll tax exemption or a new-hire retention credit, unless the employee completes and signs the W-11 affidavit or similar statement.  The form is to be kept on file by the Employer. 

Drafts of the new forms can be found at www.irs.gov.