Form to Claim Payroll Tax Exemption for Hiring New Workers Now Available

Unemployment rates were 9.9 percent nationally last month according to the Bureau of Labor Statistics. In the fight against unemployment in our country, President Obama signed the payroll tax exemption and new hire retention credit created by the Hiring Incentives to Restore Employment (HIRE) Act on March 18. The Act states that employers who hire unemployed workers this year (After February 3, 2010 and before Jan 1, 2011) may qualify for a 6.2 percent payroll tax incentive which will exempt them from the employer’s share of Social Security tax on wages.

The Internal Revenue Service announced today that they have issued the newly revised payroll tax form that most employers can use to claim the exemption of newly hired workers during 2010.

Additionally, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, employers may claim a “new hire credit” of up to $1,000 per worker.

To claim the Payroll Tax Exemption, employers would need to file IRS Form 941, Employers Quarterly Federal Tax Return. This means the HIRE act is not allowing employers to claim the payroll tax exemption for wages paid in the first quarter, only for wages paid in the second quarter. You can find the full instructions for claiming the exemption as well as claiming wages paid from March 19 - March 31 of this year on the IRS website.