Vision Payroll

Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are exempt from certain employment taxes. In order to qualify under the HIRE Act, the wages must be paid by a qualified employer “with respect to employment” in the period beginning March 19, 2010 and ending December 31, 2010. The Internal Revenue Service (IRS) has provided employers further information on the HIRE Act.

According to the IRS, the HIRE Act does not address when an individual begins employment; therefore, general principles relating to employment apply. Under these general principles, employment includes the establishment, maintenance, and termination of the employer-employee relationship, all of which depend on the facts and circumstances. Accordingly, an individual begins employment on the date when, based on the facts and circumstances of the particular situation, the employer-employee relationship is first established.

In the case of an individual who was previously employed by the qualified employer and whose employment was terminated, for purposes of determining qualified employee status, the individual begins employment on the date when, based on the facts and circumstances of the particular situation, the employer-employee relationship is reestablished.

Contact Vision Payroll if you have further questions on the HIRE Act.

The Internal Revenue Service has released Formulario W-11(SP), Declaración Jurada del Empleado Conforme a la Ley de Incentivos para la Contratación y la Recuperación del Empleo (HIRE). This form is a Spanish-language version of Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, and may be used by employers to certify worker eligibility for payroll tax forgiveness under the HIRE Act. Employers are not required to use the official form and may use another similar statement if it contains the same information and the employee signs it under penalties of perjury. Contact Vision Payroll if you have any further questions on Form W-11 or Formulario W-11(SP).

The Internal Revenue Service (IRS) recently released an information sheet attached to 2009 Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips. The note on the information sheet relates to employers that have claimed payroll tax forgiveness under the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act).

According to the note, employers should do the following (all line references are to Form 8846):

If any tipped employee’s wages are exempt from social security taxes, check the box on line 4 and attach a separate computation showing the amount of tips subject to only the Medicare tax rate of 1.45%. Subtract these tips from the line 3 tips, and multiply the difference by .0765. Then, multiply the tips subject only to the Medicare tax by .0145. Enter the sum of these amounts on line 4.

Contact Vision Payroll if you have any further questions on the revision to Form 8846.

This week’s question comes from Paul, a business owner. I have an ex-employee who qualifies for payroll tax forgiveness under the HIRE Act. We haven’t been able to get the signed Form W-11 yet. What is the deadline for obtaining Form W-11? Under the HIRE Act, for otherwise qualifying employees, employers are not required to pay the matching portion of OASDI or social security tax. Qualified employees must sign Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, to allow employers to claim the payroll tax forgiveness. Employers must obtain the signed Form W-11 before claiming any payroll tax forgiveness. Therefore, to claim the exemption for the second quarter of 2010, employers must obtain the signed Form W-11 before August 3, 2010 in order to file by the deadline of August 2, 2010. Employers that made timely deposits in full payment of their taxes for a quarter have ten more days after the due date to file Form 941, Employer’s QUARTERLY Federal Tax Return. Employers that do not receive signed Form W-11 until after they’ve filed Form 941 may not claim the payroll tax forgiveness on Form 941, but must file Form 941-X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund, to claim the exemption. Contact Vision Payroll if you have further questions on the deadline for obtaining Form W-11.

This week’s question comes from Lynn, a business owner. I recently hired my spouse to work in my sole proprietorship. My spouse qualifies using Form W-11, but I’m not sure if my spouse is considered my relative. Can my spouse’s wages qualify for payroll tax forgiveness? Answer: Under the Hiring Incentives to Restore Employment (HIRE) Act, employers may avoid paying social security tax on qualified employees and receive an income tax credit for retaining those employees. Employers are required to obtain a signed affidavit from qualified employees. Certain relatives of the taxpayer, as defined in §152 of the Internal Revenue Code of 1986 (IRC) are not eligible for the payroll tax forgiveness or the credit. They are:

• A child or a descendant of a child.
• A brother, sister, stepbrother, or stepsister.
• The father or mother, or an ancestor of either.
• A stepfather or stepmother.
• A son or daughter of a brother or sister of the taxpayer.
• A brother or sister of the father or mother of the taxpayer.
• A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
• An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to [IRC] §7703, of the taxpayer) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer’s household.

Since a spouse is not on the list of ineligible employees, wages paid to spouses of sole proprietors who otherwise qualify are eligible for payroll tax forgiveness and potentially the retention credit. Contact Vision Payroll if you have any further questions on HIRE Act.

The Internal Revenue Service (IRS) recently released a revised Form 941, Employer’s QUARTERLY Federal Tax Return, to be used by employers to claim payroll tax forgiveness under the HIRE Act for qualifying new hires. Newly added lines on Form 941 include the following:

• Line 6a – Number of qualified employees first paid exempt wages/tips this quarter
• Line 6b – Number of qualified employees paid exempt wages/tips this quarter
• Line 6c – Exempt wages/tips paid to qualified employees this quarter
• Line 6d – Payroll tax forgiveness this quarter
• Line 12c – Number of qualified employees paid exempt wages/tips March 19–31
• Line 12d – Exempt wages/tips paid to qualified employees March 19–31
• Line 12e – Payroll tax forgiveness March 19-31

Lines 12c, 12d, and 12e will be on the Form 941 for the third and fourth quarters, but are applicable only for the second quarter. Contact Vision Payroll if you have any questions on the revised Form 941.

This week’s question comes from Mike, a small-business owner. We have hired some employees whose native language is Spanish. They are better able to understand forms in Spanish than they are in English. We need them to complete Form W-11 in order to claim payroll tax forgiveness on Form 941. Is there a Spanish Form W-11 available? Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, is used to certify worker eligibility for payroll tax forgiveness under the HIRE Act. At the present time, the Internal Revenue Service (IRS) has not released a Spanish version of Form W-11. Contact Vision Payroll if you have any further questions on Form W-11.

***Please see updated information regarding the release of the Spanish version of Form W-11.

The Internal Revenue Service (IRS) recently released revised 2010 Form W-2, Wage and Tax Statement, and revised 2010 Form W-3, Transmittal of Wage and Tax Statements. The revised 2010 Instructions for Forms W-2 and W-3 indicate that employers should:

Report the amount of wages and tips paid to the qualified employee for which you claimed the payroll tax exemption in Box 12, using code CC. This will include wages and tips paid to the qualified employee from April 1, 2010, through December 31, 2010, for which you claimed the payroll tax exemption, plus wages and tips paid to the qualified employee from March 19, 2010, through March 31, 2010, for which you claimed a credit in the second quarter of 2010. The amount may not exceed $106,800 (2010 maximum social security wage base).

The box on the Form W-3 to report deferred compensation was moved from box 12 to box 12a. In addition, a new box 12b was added to report HIRE exempt wages and tips. Contact Vision Payroll if you have any questions on the 2010 Form W-2 and revised 2010 Form W-3.

The Internal Revenue Service (IRS) recently released a draft Form 941, Employer’s QUARTERLY Federal Tax Return, to be used by employers to claim payroll tax forgiveness under the HIRE Act for qualifying new hires. Newly added lines on Form 941 include the following:

• Number of qualified employees first paid exempt wages/tips this quarter
• Number of qualified employees paid exempt wages/tips this quarter
• Exempt wages/tips paid to qualified employees this quarter
• Number of qualified employees paid exempt wages/tips March 19–31
• Exempt wages/tips paid to qualified employees March 19–31

A final version of Form 941 is expected to be released next month. Contact Vision Payroll if you have any questions on the draft Form 941.

This week’s question comes from Aaron, a business owner. I just found out about the payroll tax forgiveness under the HIRE Act. We’ve hired several qualifying employees and already deposited the payroll taxes that should’ve been forgiven. Can we go back and claim payroll tax forgiveness under the HIRE Act? Answer: Under the HIRE Act, for otherwise qualifying employees, the OASDI tax, “Shall not apply to wages paid…with respect to employment during the period beginning [March 19, 2010]…and ending on December 31, 2010.” Employers may claim the credit for taxes paid related to these wages even if the taxes that are being forgiven have already been deposited. Simply reduce other payroll tax deposits in the current quarter or claim a refund with the filing of Form 941. Contact Vision Payroll if you have any further questions concerning payroll tax forgiveness under the HIRE Act.