The IRS released new Form W-11 on Wednesday for certifying that employees are qualified employees for purposes of tax benefits under the Hiring Incentives to Restore Employment (HIRE) Act (PL 111-147).
The HIRE Act, enacted on March 18, created a payroll tax credit for employers who hire workers who have been unemployed for at least 60 days and who are not replacement hires. For qualifying new employees hired after Feb. 3, 2010, and before Jan. 1, 2011, the employer can claim a credit equal to the employer’s share of Social Security taxes on wages paid in 2010. The bill also provides a credit of up to $1,000 for employers who retain such employees for at least 52 weeks.
New Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, will be used by employers to confirm that new employees are qualified employees under the act. The form requires the new employee to declare, under penalties of perjury, that he or she is unemployed or has not worked for anyone for more than 40 hours during the 60-day period ending on the date employment with the new employer starts. The form also requires the employee to supply his or her name, Social Security number, first date of employment and the name of the employer.
According to the form instructions, instead of Form W-11, another similar statement can be used, but it must contain all the information on Form W-11, and the employee must sign it under penalties of perjury.
Employers must collect affidavits from each new employee in order for the employee to count as a qualified employee for purposes of the payroll tax credit and the employee retention credit. However, the employer should not send the affidavits to the IRS, but should retain them in its records.
The IRS has also posted questions and answers for employers regarding both the payroll tax exemption for hiring unemployed workers and the credit for retaining new hires. On the payroll tax exemption, the FAQs cover employer eligibility, employee eligibility, and how to claim the exemption.
There are only two questions and answers on the retention credit. The first describes the credit and how it works. The second specifies that the employer claims the credit on its 2011 income tax return.