Payroll taxes and exemptions are just one topic researched by the Instant Tax Solutions Reviews Team, a group of employees of the firm who are passionate about consumer tax education. Recently, the staff at Aicube Blog sat down with Byron Pederson and the Instant Tax Solutions Reviews Teams to talk about this sometimes confusing subject.

Aicube Blog: Good morning and thank you all for speaking with us today.

Byron Pederson & Instant Tax Solutions Reviews Team: It’s our pleasure, and with tax time just around the corner, consumers can never have too much information!

Aicube Blog: Our thoughts exactly. To begin, can you explain to us the payroll tax exemption?

Byron Pederson & Instant Tax Solutions Reviews Team: Employers pay 6.2% share of their employees Social Security taxes. This exemption exempts employers from paying that percent for employees.

Aicube Blog: Which employers actually qualify?

Byron Pederson & Instant Tax Solutions Reviews Team: Both tax exempt and taxable firms qualify for the exemption. Additionally, employers headquartered in US territories such as American Samoa, and the US Virgin Islands may also qualify if they pay the Federal Social Security tax.

Aicube Blog: Do new businesses qualify?

Byron Pederson & Instant Tax Solutions Reviews Team: Yes, as long as they paid wages to an employee.

Aicube Blog: What if an employer makes a mistake and claims exemption on a nonexempt employee?

Byron Pederson & Instant Tax Solutions Reviews Team: Since the exemption is only for qualified employees, the employer is responsible for paying the IRS the amount.

Aicube Blog: We know that not all employees are directly employed in the firms in which they are physically located. Can those businesses still claim the credit?

Byron Pederson & Instant Tax Solutions Reviews Team: The business may only claim credit on employees they pay directly.

Aicube Blog: So can the temporary agency claim them?

Byron Pederson & Instant Tax Solutions Reviews Team: Yes, the temporary agency can claim employees that are qualified.

Aicube Blog: What if one specific employee of the temporary agency has worked for more than one business over the year?

Byron Pederson & Instant Tax Solutions Reviews Team: Determination is based on employment with the temporary agency, not the client business.

Aicube Blog: What about employees that were laid off?

Byron Pederson & Instant Tax Solutions Reviews Team: As long as the employee is rehired, the employer may have been able to claim that payroll tax exemption.

Aicube Blog: What exactly is a qualified employee?

Byron Pederson & Instant Tax Solutions Reviews Team: Employee qualification is based on employment with a qualified employer that begins after 02/03/2010 and prior to 01/01/2011. Additionally, the employee must have worked less than 40 hours per week in the 60 days prior.

Aicube Blog: Can a business apply the payroll tax exemption to employee wages if that employee replaced another employee that was terminated?

Byron Pederson & Instant Tax Solutions Reviews Team: Only if the employee was terminated due to cause or voluntarily.

Aicube Blog: Must an employee work a certain number of hours for an employer to claim an exemption on them specifically?

Byron Pederson & Instant Tax Solutions Reviews Team: There are no restrictions on the number of hours an employee must work.

Aicube Blog: Are there any payroll cuts that directly affect the employee?

Byron Pederson & Instant Tax Solutions Reviews Team: As a matter of fact, yes. The Obama administration recently extended a 2% payroll tax cut for American workers.

Aicube Blog: That’s great news for the economy.

Byron Pederson & Instant Tax Solutions Reviews Team: It is part of a $145 billion payroll package approved by the Senate on 02/21/2012.

Aicube Blog: Thank you all for speaking with us today.

Byron Pederson & Instant Tax Solutions Reviews Team: It was our pleasure.

Instant Tax Solutions Reviews IRS policy and procedure for consumer information. This article is not intended to replace the advice of a tax debt specialist. Since the IRS rules and regulations change often, the Instant Tax Solutions Reviews may be updated at any time without notice.