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IRS Form W11: Confirming that an individual is a "qualified employee" under the new HIRE Act.

The Internal Revenue Service has developed a form (Form W11) for use by employers to confirm that an employee is a qualified employee under the Hiring Incentives to Restore Employment (HIRE) Act. While it is acceptable to use a similar statement, such alternate statement will only be acknowledged by the IRS if it contains the information set forth in Form W-11, and the if employee signs it under penalties of perjury. As set forth in the version of the Act signed by President Obama last month, an employer may not claim HIRE Act benefits, including the payroll tax exemption or the new hire retention credit, unless the newly hired employee completes and signs an affidavit or statement under penalties of perjury, and is otherwise a qualified employee.

According to the Employer Instructions that accompany Form W-11, a “qualified employee” is an employee who:

• begins employment with the employer after February 3, 2010, and before January 1, 2011;

• certifies by signed affidavit, or similar statement under penalties of perjury, that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employee begins that employment;

• is not employed to replace another employee unless the other employee separated from employment voluntarily or for cause (including downsizing); and

• is not related to the employer. An employee is considered to be “related” if he or she is the employer’s child or a descendent of the employer’s child, a sibling or stepsibling, a parent or an ancestor of a parent, a stepparent, niece or nephew, aunt or uncle, or in-law of the employer. An employee also is related to the employer if he or she is related to anyone who owns more than 50% of the outstanding stock or capital and profits interest of the company, or is a dependent either of the employer or of anyone who owns more than 50% of the outstanding stock or capital and profits interest of the company.

The text of the IRS’ affidavit simply states: “I certify that I have been unemployed or have not worked for anyone for more than 40 hours during the 60-day period ending on the date I began employment with this employer.” The affidavit must be signed, dated, and a Social Security Number must be indicated, as well as the first date of employment. The signature line should follow a statement that “Under penalties of perjury, I declare that I have examined this affidavit and, to the best of my knowledge and belief, it is true, correct, and complete.” The form is not submitted to the IRS, but must be kept by the employer to document the information.

As has been stated on other occasions, employers should realize that the HIRE Act does not excuse them from complying with existing anti-discrimination and employment-related laws, and should be aware that the increased hiring generated by the Act also will require increased diligence in compliance with those existing laws.

Is Dependent to Age 26 Coverage a Tax-Free Benefit

In general, coverage provided to dependents under the dependent to age 26 coverage provisions of the health care reform are exempt from taxes. Employers with section 125 cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Employers, Plan Sponsors, have until the end of 2010 to amend their plan documents to account for this change.

Definition of a Dependent
The IRS defines a child to include a son, daughter, stepchild, adopted child or eligible foster child. The child does not need to qualify as a dependent for tax purposes as long as they fall into one of the above categories. Employees who have children who will not have reached age 27 by the end of the 2010 are eligible for this new tax benefit from March 30, 2010, if the dependent is able to be covered. The dependent will be included in the 'family' rate as any other eligible dependent would be covered as a covered dependent.

For a more detailed overview of this benefit, see the recently released IRS Notice 2010-38.