Under the HIRE Act,(a), employers are exempted from paying the employer 6.2% share of Social Security (i.e., OASDI) employment taxes on wages paid in 2010 to newly hired qualified individuals.  These are workers who: (1) begin employment with the employer after Feb. 3, 2010 and before Jan. 1, 2011, (2) were previously unemployed, (3) do not replace other employees of the employer (unless those employees left voluntarily or for cause), and (4) aren't related to the employer under special definitions.  The payroll tax relief applies only for wages paid with respect to employment beginning on Mar. 19, 2010 (the day after the HIRE Act was signed into law by the President) and ending on Dec. 31, 2010.

The IRS has issued Form W-11 which is a statement by the new employee certifying that he or she was employed for a total of 40 hours or less during the 60-day period ending on the date such employment begins.  The employee fills out his name, social security number, first date of employment with the new employer, and the latter's name, and signs it under penalties of perjury.  The employer is cautioned not to submit the form to IRS but, rather, to keep it with other payroll and income tax records.

Businesses cannot claim the payroll tax exemption until the employee signs Form W-11 and is otherwise a qualified employee.  This affidavit must be retained by the employer - not sent to the IRS.  If the business is audited by the IRS and the business “misplaced” the affidavits, then the business can be liable to the IRS for up to $7,622 per missing statement.