In response to the Hiring Incentives to Restore Employment (HIRE) Act, a new law created to encourage employers to hire workers who were previously unemployed for at least 60 days immediately prior to hiring, the Internal Revenue Service (IRS) has issued revised 2010 W-2 and W-3 forms, along with an updated list of frequently asked questions (FAQs) for employers.
The revised 2010 Form W-2, Wage and Tax Statement, now includes instructions for reporting exempt wages and tips for qualified employees under the HIRE Act. Data from Form W-2 is then reported on the revised 2010 Form W-3, Transmittal of Wage and Tax Statements. Detailed instructions for completing both forms can be found on the IRS website.
In addition to updating the forms, the IRS has also updated its list of HIRE Act FAQs for employers, with example scenarios. The FAQs define qualified employers, qualified employees, and answers questions on claiming the payroll exemption. One clarification given to employers in the FAQs is that the payroll tax exemption is based on when wages are paid to the employee, not earned. For example, if a qualified employee was paid on March 19, 2010, the wages for that two-week period would qualify for the payroll tax exemption. This is the case even though the payroll tax exemption only applies to wages paid after March 18, 2010, the date of enactment, and before January 1, 2011. The FAQs also confirm that there is a deadline for the employer to obtain the signed affidavit (Form W-11) from the employee. The employer must receive the signed affidavit before the company files an employment tax return applying the payroll tax exemption.
For more information on the HIRE Act, including an explanation of the tax holiday and additional business tax credit available to employers and the forms and requirements necessary to claim the credits, read AGC's article, "Tax Incentives Expected to Encourage Hiring; Seasonal Hires Qualify."
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