IRS Issues Clarification on HIRE Act
The IRS clarified several provisions of the HIRE Act.
First, employers will be eligible for the HIRE Act Payroll tax exemption if they hire self-employed individuals, who are not regarded as “employed” for purposes of the Act. Accordingly, an employer can also claim the exemption if they hire an independent contractor as an employee, although this is risky and a thorough analysis must be done to determine whether the employee was correctly classified as an independent contractor in the first place. If the IRS takes the position that the new employee should have been hired as an employee initially, the employer could be subject to penalties and back taxes.
Also, the HIRE Act states that an employee does not qualify for the exemption if hired to replace another employee. The IRS has clarified exceptions to this rule. An employee who replaces another employee who voluntarily terminated employment, or was terminated due to gross negligence, poor performance or due to a reduction in force, does qualify for the exemption.
Lastly, the IRS clarifies that a minor can sign the W-11 Form.
For more information, see the IRS FAQs at http://www.irs.gov/businesses/small/article/0,,id=220746,00.html