If you qualify, the new IRS Hire Retention Credit can save your business the employer’s share of the employee’s social security tax. That means that although the employee still has 6.2% social security tax taken out of their paycheck, the employer does not have to match it for qualified employees.
Who is a qualified employer? Taxable businesses, tax-exempt organizations, public colleges and universities, and Indian tribal governments. This basically covers all businesses except Federal, State, & local governments and Household Employers. So, chances are, your business qualifies as a qualified employer.
Who are qualified employees? This is a little more tricky.
First, the employee must certify via IRS Form W-11, that they were unemployed or employed for less than 40 hours per week for the 60 days prior to your business hiring the employee.
Second, the employee must be hired after 2/03/10 and before 1/01/11. However, the credit itself began with wages paid on 3/19/10. Therefore, wages paid after 2/03/10 and before 3/19/10 do not count for the credit.
Third, the employee cannot be replacing a current employee unless the current employee leaves voluntarily or was terminated for cause. This way a business cannot terminate its present employees in order to take advantage of this credit.
Fourth, a qualified employee cannot be related to the employer.
How do I claim the credit? You claim this credit on the newly designed Form 941. You can either pay your payroll taxes in full (including the employer’s 6.2% match on a qualified employee) and get a refund at the end of the quarter, or you do not include that 6.2% in your payroll tax payments throughout the quarter which should net you zero tax due on Form 941.
For additional guidance on this credit, you can go to the Official IRS Website Article.
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