Did you hire new employees in 2010 who were previously unemployed?  If so, you may have overpaid your payroll taxes. Check with your payroll preparer to ensure they are taking advantage of the new HIRE Act.

Additional Details on New HIRE Act Social Security Forgiveness Provision:

The 6.2% employer portion of the Social Security tax is exempt for qualified* individuals hired after February 3, 2010 but before January 1, 2011.  This can be taken for wages paid from March 19, 2010 through December 31, 2010 up to the $106,800 Social Security wage base.

With the Social Security Forgiveness provision, an employer can save up to $6,622 in employer Social Security tax for each qualified hire.  There is no limit to the total number of hires during this period.

A qualified individual must meet all of the following requirements:

  • Begins employment with a qualified employer after February 3, 2010 but before January 1, 2011.
  • Was either unemployed or worked for 40 hours or less during the previous 60 days, including weekends, and the previous 60 day period must be continuous.
  • The employee can be hired into a new position, or the employee may replace another employee, but only if the other employee separated from employment voluntarily, or was terminated for cause*.

Termination for cause could mean situations such as downsizing or performance issues.  Employers should consult with an attorney or employment law expert about their specific employment policies regarding ‘for cause’ reasons.

  • Is not a family member of the business owner.
  • Is not a household or government employee.

Is required to attest by signed affidavit, or similar statement under penalties of perjury, that he or she has not been employed for more than a total of 40 hours during the 60-day period ending on the date the employee begins employment with the employer.  The IRS created a new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit and is used to confirm that an employee is qualified under the HIRE Act.

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