The IRS has issued frequently asked questions and answers to the payroll tax exemption HIRE Act. The questions are divided into three categories:  

· Payroll Exemption and Qualified Employer

· Qualified Employee

· Claiming the Payroll Exemption

The IRS has also provided payroll exemption references and related topics. TALX will monitor the IRS as they continue to provide additional guidance on the HIRE Act.

Angela Lockman

On February 22, 2010, the Senate approved (62-to-30 margin) a motion to proceed with the $15-billion jobs package offered by Senate Majority Leader Harry Reid, D-Nev., which focuses on the immediate effect of hiring. The Senate passage of Hiring Incentives to Restore Employment (HIRE) Act (H.R. 2847) is an important step in the effort to put Americans back to work. The provisions of the bill include: a payroll tax holiday for certain new hires, an extension of the Build America Bonds program to existing tax credit bonds, an extension of highway authorizations, and a one-year extension of higher expensing thresholds.

On February 23, 2010, the Senate will convene at 10:00 AM. The Senate will then resume consideration of the post-cloture debate on the House Message to the Senate amendment of H. R. 2847 (Jobs for Main Street Act).  The Senate will recess from 12:30 – 2:15 for party caucuses. A final vote on the measure is expected within the next two days.

Following the vote Reid stated, by the end of February he would move to the remainder of the jobs bill introduced by Senate Finance Committee Chairman Max Baucus, D-Mont., and ranking member Charles E. Grassley, R-Iowa, that includes a package of tax extenders and other tax-related proposals to spur hiring and help stabilize the economy.

President Obama called the Senate vote "an important step forward" in job creation. The bill includes several of President Obama’s top priorities for job creation, including tax incentives for hiring and small business investment.

Angela Lockman

The Internal Revenue Service (IRS) issued Notice 2009-28 on May 28th informing employers of the recent changes and clarifications to the IRS 8850 form used as part of the WOTC screening process. You can access the link to this important notice at: http://www.irs.gov/pub/irs-drop/n-09-28.pdf

The changes occurred due in part to the additions of two new WOTC categories:  unemployed veterans, and disconnected youth in the American Recovery and Reinvestment Act of 2009, which was signed into law on February 17, 2009. The IRS originally posted the revised 8850 form and Instructions a few weeks ago, but then pulled it back to provide more clarity and definition. Through TALX’ involvement in the National Employment Opportunities Network (“NEON”) we have access to information that leads us to believe that there may be additional revisions to the form 8850 in the near future. We are closely monitoring the situation and providing input and guidance.

Given the gap between when new categories were signed into law in February and when the IRS published the revised 8850 form in May, the IRS has allowed for "Transition Relief", defined as:  

any employer who hires an unemployed veteran or a disconnected youth after December 31, 2008, and before July 17, 2009, will be considered to satisfy the deadline IF the employer submits the pre-screening notice to the designated local agency to request certification not later than August 17, 2009.  

The uncertainty in the economy surely has well-publicized ramifications for the private sector. But, those uncertainties also have created many questions with regard to the willingness and ability of federal, state and local officials to continue to offer tax credits and incentives to promote job creation and investment. Certainly, budget concerns can affect those decisions. However, we are seeing taxpayers and government officials paying a lot of attention to hiring tax incentives to try to stimulate job creation. We have many clients participating in the federal Work Opportunity Tax Credit program (WOTC). This long-standing program has been tweaked recently to further encourage hiring of targeted groups of individuals. Looking back to the late summer of ’08, we saw the extension of the Katrina WOTC category for those areas impacted by the devastating hurricanes in 2005. More recently, the Stimulus Package signed by the President in February, included the addition of two more eligibility categories to WOTC. Those are the disconnected youth category and the disabled veteran category. More information on the two new categories can be found here.

TALX has not seen a decline in interest in using tax credits and incentives to stimulate job creation and investment for targeted groups of people or in targeted areas. All the activity with WOTC gives us a dozen eligibility categories for this one popular federal tax credit program. In addition to the expansion of WOTC with the Stimulus Package, we saw in March ’09 the introduction of legislation to extend the Federal Empowerment Zone and Renewal Community tax incentives that are set to expire at the end of 2009. There are 40 Empowerment Zones in 20 states and 49 Renewal Communities in 29 states. The hiring credits available through these federally-designated zones are designed to encourage both job creation and job retention for the residents in those zones. (Link to Fed EZ/RC document here) If you want to find out if your business has an eligible address is in one of these zones, you can access a free website at http://egis.hud.gov/egis/cpd/rcezec/ezec_open.htm.

We also will be closely watching to see if the President’s budget proposing to extend ’09 tax provisions, including the extension of the WOTC Katrina category, will survive as it moves through the legislative process. Of course all this activity to expand, change or extend these programs also results in the need for administrative or regulatory changes within the agencies that regulate and monitor these programs. TALX is closely monitoring guidance as it becomes available from the Internal Revenue Service and the Department of Labor so that we can respond to the administrative changes. Taxpayers should be on the lookout for new IRS Form 8850’s to include the new categories of WOTC in the near future, as well as guidance on how to document eligibility for the new categories. So far, the response from the federal level has been to use the tax credit programs for what they are designed to do – promote targeted job creation.

Angela Lockman