In connection with the HIRE Act enacted on March 19, 2010, the Internal Revenue Service has released a revised form to help employers hiring workers who were previously unemployed or only working part time claim their tax breaks. The form and instructions can be found at www.irs.gov/pub/irs-pdf/f8846.pdf . The exemption applies to the employer’s share of Social Security tax on wages paid to qualified employees after 3/18/10. The instructions direct employers to check the box on line 4 of Form 8846 and attach a separate computation showing the amount of tips subject to only the Medicare tax rate of 1.45%.

Designed to encourage employers to hire and retain new workers, the payroll tax exemption and the related new hire retention credit were created by the Hiring Incentives to Restore Employment (HIRE) Act signed by President Obama on March 18.

In addition, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new hire retention credit of up to $1,000 per worker on their income tax return. Further details on both the tax credit and the payroll tax exemption can be found in a recently-expanded list of answers to frequently-asked questions about the new law now.

The reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

Meanwhile, the IRS has also issued temporary and proposed regulations ( TD 9486 ) addressing the new excise tax on indoor tanning services imposed by the Affordable Care Act. The liability for the 10% tax under IRC Sec. 5000B originates at the time of payment for the services. The regulations address several common situations in determining the amount paid for tanning services, including:

(1) the sale of other goods and services with tanning services,

(2) payments made with gift certificates and gift cards,

(3) sales of bundled services,

(4) payment of membership fees to a qualified physical fitness facility that includes indoor tanning services, and

(5) services purchased for another person. The provider must collect the tax and make quarterly payments on Form 720 (Quarterly Federal Excise Tax Return). The tax applies to amounts paid after6/30/10. Temp. Reg. 49.5000B-1T.

Providers of indoor tanning services will collect the tax at the time the purchaser pays for the tanning services. This means the Tanning tax will be passed on to the consumers. The tanning service provider the have to pay over these amounts to the government (IRS) quarterly, along with IRS Form 720, Quarterly Federal Excise Tax Return.

However, the tanning service does not apply to phototherapy services performed by a licensed medical practitioner in his or her premises. It also exempts certain physical fitness facilities incidentally offering tanning services to members without additional fees.

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