On April 7, 2010, the Internal Revenue Service (“IRS”) issued the form employee affidavit that employers can use to claim a payroll tax credit for newly hired employees, made available under the Hiring Incentives to Restore Employment (“HIRE”) Act that was recently signed into law.
As noted in our earlier client alert on the HIRE Act, the law contains two key tax breaks that are available to most employers, including businesses, agricultural employers, tax-exempt organizations, tribal governments, and public colleges and universities. First, it exempts an employer from paying its share of Social Security payroll taxes (normally 6.2 percent) in 2010 for any unrelated employee, hired after February 3, 2010 and before January 1, 2011, who (1) swears under oath that he or she did not work more than 40 hours during the past 60 days, and (2) was not hired to replace another employee, except one who voluntarily resigned or was terminated for cause. To demonstrate that an employee’s hiring meets the first of those tests, employers can have qualified employees sign the form affidavit, also known as a Form W-11.
Second, the Act offers a tax credit to businesses that keep a newly hired qualified employee for at least 52 consecutive weeks, so long as the employee’s wages during the last 26 weeks of that period are at least 80 percent of his or her wages during the first 26 weeks of the period. The credit is equal to the lesser of $1,000 or 6.2 percent of the employee’s wages during the 52-week period.
Additional information about these tax credits available to employers, including a useful set of FAQs, is available at the IRS website.