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Upcoming form changes necessitated by the HIRE Act

April 8, 2010

Huselton, Morgan & Maultsby, P.C. (HM&M) published an email tax alert on March 23, 2010 about the recently-enacted Hiring Incentives to Restore Employment ("HIRE") Act (P.L. 111-147).The HIRE Act encourages companies to hire qualifying unemployed workers by exempting certain wages from the employer's 6.2% share of Social Security taxes and by providing employers with a business tax credit if new hires are retained for at least 52 consecutive weeks. The payroll tax exemption applies to applicable wages paid in any period starting after March 18, 2010. Many questions have arisen from employers needing to comply with the immediate enactment of this portion of the HIRE Act. In an April 1 payroll industry teleconference call, the IRS explained changes to tax forms necessitated by the legislation.

Form 941. The IRS will be revising the second quarter Form 941, Employer's Quarterly Federal Tax Return, due on August 2, 2010. It expects to finalize the new version on April 6, 2010.The electronic specifications for the form will be revised at a later date. A draft version of the form included a new line to report tip adjustments. That line will not be included in the final version of the form. The IRS expects to include the tip adjustment line on the 2011 Form 941.

New Form W-11. An employer may not claim the payroll tax exemption unless the new hire certifies by signed affidavit (under penalty of perjury) that he was employed for a total of 40 hours or less during the 60-day period ending on the date the employment begins. The IRS has drafted Form W-11, HIRE Act Employee Affidavit, to help employers meet this requirement. It expects to finalize this form the week of April 5, 2010. The form does not need to be notarized. The IRS expects employees to be able to sign the form electronically at some point.

Forms W-2/W-3. There will be a new code on box 12 of the 2010 Form W-2 (Code CC) to indicate that a new hire had wages that qualified for the payroll tax exemption. Form W-3, Transmittal of Wage and Tax Statements, will be revised to include a line for total aggregate exempt wages.