To take advantage of the HIRE Act’s payroll tax exemption, you must have eligible new hires complete Form W-11. The form acts as a signed affidavit, certifying that the employee has not been employed for more than 40 hours during the 60-day period ending on the hire date.
Many employers pursuing this tax benefit continue to have questions, however. The IRS has responded by updating the HIRE Act FAQs on its website. Based on new details from the IRS, you should be aware that:
• As long as other requirements are met, self-employed individuals qualify, which makes you eligible for the payroll tax exemption if you hire an independent contractor as an employee.
• To meet the hiring date requirement of a qualified employee (hired after Feb. 3, 2010, and before Jan. 1, 2011), an individual’s start date must follow “general principles” relating to employment. Employment begins on the date when, based on specific facts and circumstances, the employer-employee relationship is first established.
• Generally, an employee does not qualify if he or she is hired to replace an existing employee unless the former employee 1) voluntarily terminated employment, 2) was terminated due to gross negligence, 3) was terminated for poor performance, or 4) was terminated in a reduction in force due to lack of work.
• A minor can sign the Form W-11.
The Downloadable Form W-11 from G.Neil includes a FREE Tip Sheet with helpful do’s and don’ts, and advice for identifying qualifying employees under the federal HIRE act.