If you have recently hired new employees, you may qualify for a 6.2% payroll tax incentive (forgiveness), in effect exempting you from the employer’s share of Social Security tax on wages paid to these new employees after March 18. As an employer you may qualify if the new employee meets the following:
• Employee begins employment after February 3, 2010, and before January 1, 2011
• Employee was unemployed or employed for less than 40 hours during that 60 day period ending on the date that employment begins, and
• Employee is not a family member related to the employer or owns more than 50% of the business
You must obtain certification from the employee that he or she was unemployed or employed for less than forty hours during the 60 days prior to the hire date using Form W-11 (pdf form). This form must be retained by the employer with their payroll and tax records to substantiate their eligibility for the Social Security exemption.
To claim the payroll tax exemption, the employer uses the Form 941, Employer’s Quarterly Federal Tax Return.
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