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 2nd 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.

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