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Hire Act Forces IRS to Revise W-2/W-3 Forms, Instructions

Due to the HIRE Act, the IRS has revised the forms and instructions for W-2, W-3, and W-3c. Below are some highlights of these changes:

Form W-2 “Wage and Tax Statement”

The actual format has not changed but they have added the code “CC” to be used in Box 12. There are a few things that employers need to keep in mind regarding what should be entered using this new code “CC”:

Only wages paid to a “qualified” employee should be reported.

Only use this code to report wages of employees on your payroll that are exempt from the employer’s portion of social security tax as a result of the HIRE Act.

Report the exempt wages (not the tax).

Include all exempt wages which includes both periods March 19-31,2010 AND April 1st, December 31, 2010.

The amount of exempt wages can not exceed $106,800 (the social security wage limit for 2010).

Form W-3Transmittal of Wage and Tax Statements”

Instead of having a Box 12, the form now has a Box 12a and Box 12b.  What was reported in Box 12 before will now be entered in Box 12a “Deferred Compensation” (includes codes D-H, S, Y, AA & BB).  Box 12b “HIRE Exempt Wages and Tips” will be used to report the total exempt wages that were reported on all of the W-2 forms Box 12 labeled with “CC”.

Form W-3c “Transmittal of Corrected Wage and Tax Statements

Changes to this form are similar to the ones in Form W-3.  Basically, Box 12 has been replaced with Box 12a and Box 12b.  Box 12a will be used for the “Deferred Compensation” (includes D-H, S, Y, AA & BB).  Box 12b “HIRE exempt Wages and Tips” for reporting the HIRE exempt wages.

The IRS has also updated the instructions for the 2010 Forms W2 & W3. The changes are found on page 11 where they have added instructions for the new code “CC”.

Please stay tuned for further updates.

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