Hire a Smart Kid, Get a Discount from the IRS

You can eliminate your employer share of the Social Security tax wages by hiring a “qualified new hire.”  This means a 6.2% tax exemption from wages paid to these workers from March 19, 2010 – December 31, 2010.

As part of the Hiring Incentives to Restore Employment Act, this tax exemption is available to taxable and tax-exempt organizations, including businesses started during tax credit time period.

So here’s how to get it:

1.  Hire a Qualified New Employee.  The qualifications are:

•   The employee was hired after February 3, 2010.

•  The employee was employed less than 40 hours in the 60 days prior to his/her start date.  This includes those who were “unemployed” due to school as opposed to a lay off.

•  The employee has signed an Affidavit confirming their status – Form W-11, which is retained by the employer, not filed with IRS.

•   The employee can not also be a “Work Opportunity Tax Credit” employee.

•   The employee may not be a relative of the employer.

2.  The exemption is then applied when the employer’s Form 941 for the 2^nd Quarter of 2010 is completed.
3.  The credit is available on wages paid to qualified employees from 3/19/10 – 12/31/10.

Special Bonus Credit

If the employer retains the employee for 1 year (52 consecutive weeks), then the employer is eligible to claim a “new hire retention credit” of up to $1,000 on their 2011 returns.

Lynam & Associates maintains an active tax law practice.  If you have questions about the payroll tax exemption, please feel free to contact us.