IRS Releases Finalized Form 941, Enabling Employers to Claim HIRE Act Payroll Tax Exemptions

On May 18, 2010, the IRS released its finalized version of Form 941: Employer’s Quarterly Federal Tax Return, which may be accessed here.

This form enables employers to claim the HIRE Act payroll tax exemption for qualified employees hired in 2010. A qualified employee is one who certifies by a signed affidavit, under penalties of perjury, that he or she has not been employed more than 40 hours during the preceding 60-day period, is not being employed to replace another employee (except one who quit voluntarily or was discharged for cause), and is not “related” to the employer under rules in the U.S. Tax Code. President Obama signed the HIRE Act into law on March 18, 2010. At its core, the bill grants employers an exemption for their 6.2% Social Security (FICA) payroll contribution for every new qualified employee hired after February 3, 2010, and before January 1, 2011. The exemption is effective for wages paid from March 19, 2010 through December 31, 2010.

Claiming The Exemption

Employers can use Form 941 to claim a credit in the second quarter of 2010 for wages paid to qualified employees from March 19 through March 31, 2010. Employers can also use Form 941 to claim a tax exemption for wages paid to qualified employees for the remainder of the year, April 1, 2010 through December 31, 2010. The IRS also issued Instructions to assist employers in claiming the exemption, which may be accessed here.

Seyfarth Shaw’s prior alerts regarding the HIRE Act include President Obama Signs HIRE Act and IRS Releases Finalized HIRE Act Employee Affidavit

If you have any questions about the revised Form 941 or the HIRE Act, please contact the Seyfarth Shaw attorney with whom you work, or any Labor and Employment attorney on our website.