The Internal Revenue Service has posted the new forms and instructions for employers who want to get credit for hiring the unemployed.

A review of the relevant details of the HIRE Act:

• Employers who hire unemployed workers this year (after Feb. 3, 2010, and before Jan. 1, 2011) may qualify for a 6.2% payroll tax incentive, in effect exempting them from the employer’s share of Social Security tax on wages paid to these workers after March 18.
• The reduction will have no effect on the employee’s future Social Security benefits. The employee’s 6.2% share of Social Security tax and the employer and employee’s shares of Medicare tax still apply to all wages.
• For each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new-hire retention tax credit of up to $1,000 per eligible worker.

You can get further details about the tax credit and the payroll tax exemption from a recently expanded list of answers to frequentlyasked questions about the new law.

To claim the payroll tax exemptions
New Form 941, Employer’s QUARTERLY Federal Tax Return, revised for use beginning with the second calendar quarter of 2010, will be filed by most employers claiming the payroll tax exemption for wages paid to qualified employees. The HIRE Act does not allow employers to claim the exemption for wages paid in the first quarter but provides for a credit in the second quarter. The instructions for the new Form 941 explain how this credit for wages paid from March 19 through March 31 can be claimed on the second quarter return.

Important notes:

• The HIRE Act requires that employers get a signed statement from each eligible new hire, certifying under penalties of perjury, that he or she was not employed for more than 40 hours during the 60 days before beginning employment with that employer. You can use new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, released last month, to meet this requirement.
• Though employers need this certification to claim both the payroll tax exemption and the new hire retention credit, they do not file these statements with the IRS. Instead, they must retain them along with other payroll and income tax records.
• New hires filling existing positions — and not just positions that have been added to your payroll — also qualify as long as they are replacing workers who left voluntarily or who were terminated for cause and otherwise are qualified employees.
• Family members and other relatives do not qualify for either of these tax benefits.
• Businesses, agricultural employers, tax-exempt organizations, tribal governments and public colleges and universities all qualify to claim the payroll tax exemption for eligible newly-hired employees. Household employers and federal, state and local government employers, other than public colleges and universities, are not eligible.