HIRE Act: IRS updates FAQs, releases new Form 941

With summer around the corner, we’ve received a number of questions regarding whether the HIRE Act payroll tax exemption can be taken when hiring a recent graduate or summer intern. The answer is definitely yes for recent graduates, and it appears to be yes for summer interns, although the IRS guidance isn’t exactly clear. Check out the FAQ section of the IRS website and discuss your options with your tax adviser.

An important note about the IRS FAQs: If you’ve been relying on them to determine whether you can take advantage of the HIRE Act when hiring a particular employee, be sure to double check their website when you hire someone new. We’ve noticed that the IRS has been updating their FAQs frequently, so make sure nothing significant has changed. You may want to print out a copy with a date stamp for your files.

Also, the IRS has released an updated Form 941, Employers’ Quarterly Federal Tax Return, which you should use beginning with your second calendar quarter report for 2010. New instructions for Form 941 have also been released, which explain how to take the HIRE Act credit for qualifying wages paid in the first quarter.