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IRS Issues Forms, Instructions for HIRE Act Employer Tax Incentives

May 03, 2010

Wasting little time in helping important business hiring, the IRS has released forms and instructions for the employer tax breaks in the Hiring Incentives to Restore Employment (HIRE) Act.  The IRS unveiled new Form W-11, Employee Affidavit, which employees can use to certify that they meet the criteria of the HIRE Act.  It also revised Form 941, Employer's Quarterly Federal Tax Return, and Forms W-2, Wage and Tax Statement, and W-3, Transmittal of Wage and Tax Statements, to reflect the HIRE Act.

Temporary incentive

Under the HIRE Act, qualified employers can enjoy a payroll tax holiday from their share of OASDI tax paid for covered employees.  The "holiday" applies to all covered employees for wages after March 18, 2010 and before January 1, 2011.  Additionally, the new employee can begin employment anytime after February 3, 2010, although only 2010 wages paid after March 18 count for the holiday.

The HIRE Act also allows qualified employers to claim a worker retention credit.  For each covered employee, the employer's general business credit is increased by the lesser of $1,000 or 6.2 percent of the retained worker's wages during a 52-week consecutive period.  That 52-week period can start anytime after February 3, 2010 and through December 31, 2010.

Form W-11
The HIRE Act requires employers to obtain a statement from each eligible new hire certifying that he or she has been unemployed or underemployed.  Employers can use new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit.

Form W-11 asks the covered employee to certify that he or she has been unemployed, or has not worked for anyone for more than 40 hours during the 60-day period ending on the date that the individual began employment with the employer.  The covered employee must sign the form under penalties of perjury.  Form W-11 does not have to be filed with the IRS, but the employer must make the form available to the IRS if requested.

Form 941
The IRS has also revised Form 941, Employer's Quarterly Federal Tax Return, for the HIRE Act.  The payroll tax exemption is claimed on Form 941 beginning with the second quarter of 2010.  For wages paid to covered employees during the period of March 19 through March 31, 2010, the payroll tax exemption is claimed on the employer's Form 941 for the second quarter of 2010.

Forms W-2, W-3
Employers that hire a covered employee under the HIRE Act must report the amount of Social Security wages and tips paid after March 18, 2010 for which the employer claimed a payroll tax exemption.  Employers will report these amounts in Box 12 on Form W-2 using new code CC. The amount may not exceed $106,800 (the maximum Social Security wage base for 2010).  The total of code CC is reported in new Box 12b on Form W-3.


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