On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act into law, providing tax incentives for businesses hiring unemployed workers and extending hiring deduction limits for small businesses that make capital improvements.

Employers may now access the final version of Form W-11, “Hiring Incentives to Restore Employment (HIRE) Act Affidavit” on the IRS website. Click here. This form can be used to confirm that an employee is a qualified employee under the HIRE Act.

A new set of HIRE Act Questions and Answers for Employers is also available on the IRS website. Click here. In addition to addressing general questions regarding the payroll tax exemption, the new Q&As address specific questions about which employees qualify and how to claim the payroll tax exemption.

In addition to the new Form W-11, the IRS has issued revised Forms W-2, W-3, and Instructions for both Forms W-2 and W-3 to reflect changes made by the HIRE Act. A new code for box 12 of Form W-2, Code CC, has been added for employers to report the amount of wages and tips covered by the payroll tax exemption under the HIRE Act. The total of Code CC is reported in new box 12b on Form W-3, and the total of deferred compensation amounts, previously reported in box 12, is now reported in new box 12a on Form W-3. These forms and instructions are available on the IRS website. To view the forms and instructions regarding Form W-2, click here. To view the forms and instructions regarding Form W-3, click here.

Employers will not take into account any first quarter exempt wage amounts accumulated from March 19 through March 31 on the first quarter Forms 941 due April 30, according to the IRS. Instead, these amounts will be treated as a payment made on the first day of the second quarter on the revised Form 941 – as is done with the current COBRA subsidy tax credit. For the following quarters, employers will report total amounts on the first page of Form 941, and reduce the liability on Schedule B of Form 941 by the amount of the tax reduction. The IRS has released an advance proof copy of Form 941 click here which is subject to change and OMB approval before it is officially released.

As always, we will provide updates on further developments if warranted.

By Jeffrey C. Rambach, jrambach@dsda.com