Employers curious about tax credits, read on: IRS Form W-11 could get you a tax credit. Form W-11 is a form used to verify that an employee you recently hired is eligible to qualify you for a tax credit under the Hiring Incentives to Restore Employment (HIRE) Act.
The form is really just a certification by the employee that states the following: “I certify that I have been unemployed or have not worked for anyone for more than 40 hours during the 60-day period ending on the date I began employment with this employer,” and “Under penalties of perjury, I declare that I have examined this affidavit and, to the best of my knowledge and belief, it is true, correct, and complete.”
Very little information is necessary to fill out a W-11. The form contains only the employee’s name and social security number, and the name of the employer, in addition to the standard signature and date. A Form W-11 signed by an employee allows the employer to file for certain benefits, including a payroll tax exemption and a new hire retention credit.
Only qualified employees may sign the form. A “qualified employee” is one who:
- Begins employment with you after February 3, 2010 but before January 1, 2011
- Signs an affidavit certifying that they have not been employed for more than 40 hours in the 60 day period proceeding the beginning of their employment with you
- Is not employed to replace another employee, unless that employee separated voluntarily or for cause, such as downsizing
- Is not related to you. An employee is considered related to you if they are your child or descendant of your child, spouse, sibling or step-sibling, parent or other ancestor, stepparent, niece or nephew, aunt or uncle, or in-law. An employee is also considered related to you if they are related to anyone who owns above 50% of your outstanding stock, capital, or profits interest OR if they are a dependent of anyone who owns such an interest, regardless of familial relationship.
After completing the form, you need not send it to the Internal Revenue Service. The Form W-11 is retained by employers with other employment records. (Make sure to retain them. Should the IRS request them, there may be penalties if you fail to provide them.)
The rewards of filing for benefits under the HIRE Act are clear.
For starters, there’s the payroll tax exemption. This exempts employer’s from their typical share of social security tax. That’s 6.2% of an employee’s wages! So, a worker making $30,000 now costs you, as an employer, $1860 less.
In addition, the HIRE retention credit is a general business credit that encourages retention of newly hired employees. The credit is good for the lesser of $1000 or 6.2% of wages paid to the employee during the one year tax period. Qualified employees’ wages during the second half of the year must equal at least 80% of wages paid in the first half of the year.
Add it all up and that new hire’s $30,000 salary will cost you $2860 less than it used to. And we can only hope that your new hire helps you take on more business, expand, and bring in more revenue than before.
Published or updated April 5, 2013.