On April 7, 2010, the IRS released the Hiring Incentives to Restore Employment Act ("HIRE Act") Affidavit, Form W-11, which can be found at http://www.irs.gov/pub/irs-pdf/fw11.pdf. The HIRE Act encourages employers to hire previously unemployed employees by providing a payroll Social Security tax exemption. It also provides a business tax credit to employers who retain employees for at least one year. See our prior advisory regarding the HIRE Act.
Employers seeking to take advantage of the HIRE Act's tax incentives must have new employees sign an affidavit certifying that they have not been employed for more than 40 hours during the 60-day period they were unemployed. Employers should not submit the executed Form W-11 to the IRS, but must retain the signed affidavit for their own records.
Employers are not required to use Form W-11, but, in the alternative, the employee must sign a similar statement under the penalties of perjury. Indeed, an employee is not "qualified" under the HIRE Act, and employers cannot receive tax incentives, unless the employee signs Form W-11 or another similar statement.
Form W-11 also clarifies at least one substantive provision of the HIRE Act. Under the HIRE Act, a newly hired worker will not be a qualified employee if the individual is hired to replace another employee, "unless such other employee is separated from employment voluntarily or for cause." Form W-11 provides that "for cause" includes "downsizing," meaning that new employees hired to replace employees who had been laid off due to a downsizing can qualify for the credit
With the newly available Form W-11 and Questions and Answers, employers should be poised to take full advantage of the incentives the HIRE Act provides.