Future of The HIRE Act’s Payroll Tax Exemption Benefit


While many U.S. employers have taken advantage of the 2010 federal HIRE Act’s Payroll Tax Exemption benefit, many more have not.  As it currently stands, the Payroll Tax Exemption program is slated to expire on December 31, 2010; however, at least 2 facts mitigate the looming end of the program.
First, employers who have not yet utilized the program still have an opportunity to catch up.  At my firm, we’re in the process of bringing on a new client with more than 35 business locations.  Even during this down economy, my new client has hired hundreds of employees since February 4th when the Payroll Tax Exemption program first kicked in.
To claim the benefit, an employer must get a signed statement from the employee stating under penalty of perjury that they were unemployed during the 60 days prior to hire.  We know that many of these new employees were unemployed and would therefore be eligible.  So, as part of our boarding process, we’re surveying them — finding out which employees qualified at their time of hire.
Now, this large employer will be exempt from the 6.2% employer-portion of the federal payroll tax for a goodly percentage of its 2010 hires.  To secure this benefit, it will have to file adjusted payroll tax returns for quarters 2 and 3. That should not be a problem.
Another benefit is that the qualifying employees who remain employed into next year (for at least 52 weeks of total employment) can trigger a bonus tax credit equal to another 6.2% of the wages paid during that first 52 weeks of employment.  We’ll continue following well into 2011 to determine the status of these employees.  Our client has an added incentive to keep them working.
For many, a technical question arises here.  Isn’t there a deadline for getting the employee’s signed affidavit?  Answer: Yes, and no.  Here’s the IRS’ way of explaining it.

[T]he employer must have the signed affidavit by the time the employer files an employment tax return applying the payroll tax exemption. If the employer obtains the signed affidavit from the qualified employee after wages are paid to the employee, the employer can still apply the payroll tax exemption to determine its liability on these wages. In some cases this may require the filing of a corrected return for a prior quarter.  IRS FAQs

In other words, you must get the statement before you actually claim the benefit.  But, you can get the statement then go back and claim the benefit using an adjusted tax return.  In the case of my new client, their payroll service will need to file adjusted returns, IRS Form 941X in order to claim the benefit for quarters 1, 2 and 3.
So, where does this all go as of December 31, 2010?  Will the Payroll Tax Exemption program be extended for another year?  According to Paul E. Suplizio, President of the WOTC Coalition, there is no certainty but the odds favor an extension as Congress and the Administration continue to grapple with the problem of unemployment in 2011.
If you have questions about the HIRE Act’s Payroll Tax Exemption program, or any other employment based tax benefit, please feel welcome to contact me.  I am Vaughn Hromiko, (800) 655-5281, ext 101 or vah@WOTCPlanet.com

Blog at WordPress.com.