Use Form W-11 to confirm that an employee is a qualified employee under the HIRE Act. Claim your payroll tax exemption with our payroll program. Download a free trial of Payroll Mate our small business payroll software .
Washington has recently enacted the HIRE Act (Hiring Incentives to Restore Employment). This new law includes two tax incentives to be claimed by employers who hire workers who were previously unemployed or only working part time. The tax benefits apply to workers hired after Feb. 3, 2010 and before Jan. 1, 2011 and/ or for each worker employed for at least a year.The first payroll tax exemption involves the employer’s share of Social Security tax on qualified employees starting on wages paid on March 19, 2010. The employer will be exempt from their 6.2% Social Security tax through December 31, 2010. The second payroll tax credit (hire retention credit) applies in the case of the newly hired workers staying employed for at least a year. Business owners may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.The IRS has released a modified 2010 Form 941 in order to claim the payroll tax exemption. Employers will start using this form for second quarter 941 filing. The payroll tax exemption is based on when the wages were paid regardless of when the wages were earned. Wages paid to qualified employees during the first quarter from March 19, 2010 to March 31, 2010 are claimed on the second quarter Form 941 as a credit. The amount of the credit will be refunded to the employer or applied towards a liability in a following quarter. The exemption must be claimed on the return for the quarter in which the wages were paid. Employees must certify by a signed affidavit, under penalties of perjury, that they have not been employed for more than 40 hours during the 60-day period ending on the date they started employment. The IRS has issued Form W-11 that business owners may use as the affidavit. You are allowed to use another similar statement if it contains employee name, Social Security Number, first date of employment and name of employer. The employee must sign it under penalties of perjury.