IRS Issues HIRE Act FAQs and Draft Version of Employee Affidavit

The IRS has issued frequently-asked questions on the "Hiring Incentives to Restore Employment Act" , and a draft version of a form that, when finalized, may be used by employers to confirm that a new hire qualifies for certain tax incentives in the bill.

The HIRE Act encourages companies to hire unemployed workers by exempting certain wages from Social Security taxes (payroll tax exemption), and by providing employers with a business tax credit if new hires are retained for at least 52 consecutive weeks. For an employer to receive these tax benefits, the unemployed worker must be a "qualified individual." A qualified individual is anyone who:

(1) begins work for a qualified employer after Feb. 3, 2010 and before Jan. 1, 2011;

(2) certifies by signed affidavit (under penalties of perjury) that he was employed for a total of 40 hours or less during the 60-day period ending on the date the employment begins;

(3) is not employed to replace another employee of the employer unless that former employee separated from employment voluntarily, or for cause; and

(4) is not related to the employer

Frequently-Asked Questions

There are FAQs on both the payroll tax exemption and the new business tax credit. The payroll tax exemption FAQs are divided into the following three categories: (1) FAQs about the payroll tax exemption and qualified employers; (2) FAQs about qualified employees; and (3) FAQs about claiming the payroll exemption.

Of note is that the IRS says that the exemption may be claimed on employees laid off in 2009 who have been receiving COBRA premium assistance for which the employer has been taking the COBRA premium assistance credit, if the employer rehires the employee, and the employee meets the qualified individual requirements noted above. The credit may be claimed on recent graduates who have been in school for some or all of the 60 days preceding the start of their employment if they meet the qualified individual requirements noted above. It is not necessary that the individual was previously employed and has lost his or her job to be a qualified employee. The COBRA premium assistance credit and the payroll tax exemption for new hires may be claimed on the same employment tax return.

There are two new Q&As on the business tax credit that cover the basic rules for claiming the credit. Employee Affidavit

The IRS has drafted Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, to help employers meet the second requirement under "qualified individual" above. The form instructions state that the employee must complete and sign the affidavit, or a similar statement, under penalties of perjury, for an employer to receive the tax benefits noted above. The draft version of Form W-11 requires qualified individuals to provide their name, Social Security Number (SSN), first date of employment, and name of the employer.