Payroll Tax Exemption Form Now Available From IRS
The recently signed Hiring Incentives to Restore Employment Act that was signed by President Obama on March 18th allows for payroll tax incentives and exemptions for certain employers. For new workers hired in 2010, the IRS is allowing for a number of payroll tax incentives including a 6.2 percent payroll incentive and also a new hire retention credit of up to $1,000 per employee. The details of each incentive are described more in the recent IRS News release:
May 18, 2010
WASHINGTON — The Internal Revenue Service has issued the newly revised payroll tax form that most eligible employers can use to claim the special payroll tax exemption that applies to many new workers hired during 2010.
Designed to encourage employers to hire and retain new workers, the payroll tax exemption and the related new hire retention credit were created by the Hiring Incentives to Restore Employment (HIRE) Act signed by President Obama on March 18.
Employers who hire unemployed workers this year (after Feb. 3, 2010, and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from the employer’s share of Social Security tax on wages paid to these workers after March 18. This reduction will have no effect on the employee’s future Social Security benefits. The employee’s 6.2 percent share of Social Security tax and the employer and employee’s shares of Medicare tax still apply to all wages.
In addition, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new hire retention credit of up to $1,000 per worker on their income tax return. Further details on both the tax credit and the payroll tax exemption can be found in a recently-expanded list of answers to frequently-asked questions about the new law now.