IRS Issues More HIRE Act FAQs

More frequently-asked questions have been added to the IRS website on the provisions in the Hiring Incentive to Restore Employment Act that allow qualified employers to claim a payroll tax exemption and/or new hire retention credit.

New Payroll Tax Exemption FAQs

The payroll tax exemption FAQs are divided into 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.

Below are a few examples of questions and answers.

Self-employed individuals. For purposes of “qualified employee” status, work performed as a self-employed individual does not count in determining whether an individual has been employed for 40 hours or less during the 60-day period ending on the date before the individual begins employment.

Minors. Minors may sign the HIRE Act employee affidavit (under penalties of perjury). Form W-11 may be used for this purpose.

New Hire Retention Credit

An employer may claim the new hire retention credit as a general business credit on its 2011 income tax return for each “retained worker.” A “retained worker” is a qualified employee who remains an employee for at least 52 consecutive weeks, and whose wages for the last 26 weeks equal at least 80% of the wages for the first 26 weeks. The amount of credit is the lesser of $1000.00 or 6.2% of wages paid by the employer to the retained worker during the 52-consecutive-week period.

An employer can claim the new hire retention credit on an income tax return and the payroll tax exemption on an employment tax return, with respect to the same employee, as long as the requirements for both tax incentives are met.