The IRS has issued a new Form 941 - Employer's Quarterly Federal Tax Return - to allow employers to claim the HIRE Act exemptions to the payroll tax. Instructions for completing the form can be found here.
Cross-posted at D. J. Marcus's Tax Blog
While it is always best to use the most up to date forms for IRS filings, and sometimes the IRS will stop accepting outdated forms, in this case, it is especially important to update your form. The new exemptions can save your small business the 6.2% payroll tax on wages paid to qualified workers in 2010. If you've hired workers that qualify for the HIRE exemption, make sure your tax preparer is using the new 941.
For those of you unfamiliar with the Hiring Incentives to Restore Employment Act, here's a basic rundown:
(If you want to delve into the actual language of the bill, take a look at Title I on page 7 and Title II on page 12 of the above-linked PDF. The main Business Tax Relief section starts on page 74.)
For the small business owner, and the unemployed worker, the most important provision of the bill is Title I. Normally, business owners pay a 6.2% employment tax on employee wages. This new subsection provides an exemption to that tax - up to $6,621 per qualified worker, which equals 6.2% of wages paid in 2010 up to the FICA wage cap of $106,800. A qualified worker is any worker who has been unemployed for at least 60 days directly prior to the date of hire. Title I also provides for a $1000 addition to the general business credit for every qualified worker who remains on the job for at least 52 weeks after the date of hire.
Title II provides an extension of the Section 179 deduction created by the American Recovery and Reinvestment Act. In a nutshell, Section 179 allows business to deduct up to $250,000 of qualifying property during the tax year in which it is purchased, rather than claiming smaller, depreciation deductions over multiple years. It can provide a large boost in cash-flow during a tough year.
Both sections can boost small business productivity during the current economic slump.