Hiring? Don’t Miss Out on Federal Tax Savings!

March 21 2016 | by Thomas J. Moul, CPA

The Federal Work Opportunity Tax Credit has dollars for you!

Is your company growing and you are responding by hiring more staff? If the answer is YES, Uncle Sam may have some dollars for you!

The federal Work Opportunity Tax Credit (WOTC) is an often overlooked reward for hiring individuals in certain target groups. The credit for hiring these individuals can range from $1,200 to $9,600 per hire. The credit can be used to offset federal corporate income taxes or in the case of pass through entities (S corporations, partnership, sole proprietorships) be used by the owners to offset federal individual income taxes. Tax-exempt organizations can even use the credit to offset employer payroll taxes.

Usually you must be very proactive to take this credit. Even though the credit is a federal credit, paperwork must be filed with your state workforce agency. This paperwork must be completed during the hiring period and filed within 28 days of the employee’s start date.

The good news is that for your 2015 and year to date 2016 hires, you still have a chance to take advantage of this credit! The WOTC expired on December 31, 2014 only to be reinstated retroactively on December 18, 2015 when President Obama signed the Protecting Americans from Tax Hikes (PATH) legislation. The credit is now in place through December 31, 2019.

Since it was obviously too late to file 2015 paperwork by the hire date when the credit was reinstated, there was a need for an interim solution. This solution was provided on June 20, 2016 with the issuance of IRS Notice 2016-40. The notice gives employers until September 28, 2016 to file the required paperwork for all hires through August 31, 2016.   Beginning, September 29, 2016, the reporting requirements return to the prior rules.

So who are the target groups? They are:

  • Veterans
  • TANF Recipients
  • SNAP (Food Stamp) Recipients
  • Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
  • Vocational Rehabilitation Referral
  • Ex-felons
  • Supplemental Security Income Recipients
  • Summer Youth Employees (living n Empowerment Zones)
  • And beginning January 1, 2016:
  • Long term unemployed – defined as being unemployed for at least 27 weeks and drawing unemployment benefits
  • Any business can take advantage of the credit if they hire qualified employees.

Industries that typically have a high rate of qualified hires include:

  • Manufacturers
  • Distributors
  • Restaurants
  • Employment Agencies

If you aren’t sure if any of your hires qualify or if you are not comfortable asking these questions of your employees, Stambaugh Ness can assist.   Because of the significant benefits of this credit we’ve developed a program, in conjunction with our strategic partner Clarus Solutions, to identify qualifying hires and complete the required paperwork. Studies have shown that nearly one out of every five hires nationally qualify for the credit, reason enough to check out where you stand.

Contact me directly to find out more information about our WOTC program.

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