The Hiring Incentives to Restore Employment Act, known as the HIRE Act, creates an employer exemption from the employer’s portion of Social Security tax for new, ‘qualified’ employees hired after February 3, 2010. A change was made to the quarterly form 941 to record the exemption. You, as the employer, may elect to not participate in the exemption and, instead, you may be eligible for a Work Opportunity Credit.
See the resources at the end of this article for more information about the exemption, 941 instructions, form W-11 Affidavit, and Form 5884 Work Opportunity Credit. As always, we recommend you seek the assistance of a qualified tax accountant.
1. Install Fund Accounting version 5.320 Update.
2. Identify and check qualified HIRE employees. You may do this at any time before you print the 941 report.
Go to the Emp/Cust tab on the Employee screen. Click Find button to find the employee.
Enter the Employment Date (date of hire). To the right of the Employment Date is the HIRE checkbox. Check the box to indicate the employee is ‘qualified’ according to the IRS instructions found in the resources below. All qualified employees must submit to you a Form W-11.
3. On the 941 report, lines 6a-6e and 12c-12e have been added.
Line 6c will be the current quarter’s amount of Social Security Gross wages of the HIRE employees. 6d is the calculation of the employer’s share of Social Security tax. Your tax is reduced by that amount.
Line 11 should be the actual amount of tax you paid for the quarter which should be greater than Line 10 adjusted tax. You should expect an overpayment on Line 15.
If you had HIRE employees paid between March 19-31, their count, wages and employer Social Security tax will appear on Lines 12c-12e to report and give credit for part of the first quarter as of the date the HIRE Act was signed.
Lines 17, Monthly Summary and the 941 Schedule B reports will report the monthly and daily tax summaries less the HIRE employer’s Social Security share. Their total will match Line 10 of Form 941.
Resources
Form W-11, HIRE Employee Affidavit and instructions: http://www.irs.gov/pub/irs-pdf/fw11.pdf.
Form 5884 Work Opportunity Credit, form and instructions: http://www.irs.gov/pub/irs-pdf/f5884.pdf.
Revised Form 941 for 2010 (Employer's Quarterly Federal Tax Return): http://www.irs.gov/pub/irs-pdf/f941.pdf.
Instructions to revised Form 941 for 2010 (Employer's Quarterly Federal Tax Return): http://www.irs.gov/pub/irs-pdf/i941.pdf.
IRS's “FAQs About Claiming the Payroll Exemption,” dated May 6, 2010: http://www.irs.gov/businesses/small/article/0,,id=220750,00.html.